HC Deb 26 February 1997 vol 291 cc343-67 3.47 pm
The Exchequer Secretary to the Treasury (Mr. Philip Oppenheim)

I beg to move, That this House takes note with approval of the Government's assessment as set out in the Financial Statement and Budget Report 1997–98 for the purposes of section 5 of the European Communities (Amendment) Act 1993. The motion seeks parliamentary approval of the Government's assessment of Britain's economic and budgetary position in order to allow treaty obligations to be fulfilled in relation to the excessive deficits procedure and the broad economic guidelines. The assessment is contained in the "Financial Statement and Budget Report"—the Red Book—parts of which are relayed to the European Commission. The "Financial Statement and Budget Report" describes the Government's tax and spending plans and explains how they are related to their economic and political objectives. The front cover of the Red Book states that it forms the basis of submissions to the European Commission for the purposes of multilateral surveillance of economic policies.

In sending the information, the Government are continuing to co-operate with the long-standing practice of sharing information on economic matters with our partners in the Community. Most of that information is already in the public domain.

Approval today would allow the Government to participate in this year's surveillance exercises in the same way as in previous years. There is no question whatever of information submitted being used to make policy recommendations with any binding effect on the United Kingdom.

Surveillance by the Commission is nothing new. Formal surveillance at Community level has been in place for more than 20 years, and we have also signed up to the independent examination of our economic performance by international bodies such as the Organisation for Economic Co-operation and Development, the International Monetary Fund and G7.

Participating in such surveillance exercises has enabled independent international bodies to proclaim the United Kingdom's economic record to a wide audience, helping to promote the Government's economic policies. For example, the Commission's recently published annual economic report noted that unemployment in the United Kingdom is much lower than the European Union average, and that our strong performance can be attributed directly to the Government's deregulatory labour market measures.

The Commission also noted that the UK recovery has been of a longer duration than that of the rest of the EU, and that it has been sustainable, with inflationary pressures subdued. The Commission cited the Government's policies as the cause of that favourable outturn, in particular applauding the UK's macro-economic policy framework and supply-side reforms.

The Commission noted that the Government's prudent monetary policies are expected to keep inflation within its desired range, and that the Government should reach their target of 2½ per cent. for underlying inflation. I should add that those are all the very words used by the Commission.

The House may also note that inflation has been below 4 per cent. for more than four years, the longest time for more than half a century; that public finances are under tight control, allowing tax to be cut in the past two Budgets, with Government borrowing on a clear downward trend; and that interest rates remain at historically low levels.

However, the debate is primarily about transmitting information to the European Commission to comply with our treaty obligations, and I hope that the House will support the motion.

3.50 pm
Mr. Mike O'Brien (North Warwickshire)

What does all this mean, and does it matter, especially if the Government are hostile in any event to a single currency?

Last week, the Foreign Secretary appeared to tell us on the "Today" programme that he was hostile to a single currency. Then we heard from one of our national newspapers that the right hon. Member for Wokingham (Mr. Redwood) had contacted Conservative party central office to ask whether he could call that a significant change of policy, and got official blessing.

At about 11 am, the Chancellor said that the Foreign Secretary had made a slip of the tongue, and that there was no change of policy. By lunchtime, the Foreign Secretary had said that it was not a slip of the tongue; therefore, presumably it was a change of policy. Meanwhile, the Prime Minister had issued a statement saying that there had been no change of policy. Nobody seemed to know what the policy was.

The Chancellor and the Foreign Secretary were clearly at odds. The Prime Minister tried to settle that adult Punch and Judy show by organising a meeting between the two that evening. I understand that the two combatants met at about 10.30 pm and issued a press release at about 2 am the following morning, saying that the Government were hostile only to a fudged single currency. They may say that, but does anyone seriously believe it?

The following day, the former Chancellor, Lord Howe, said on the "Today" programme: Yesterday's spat didn't do any good for the Conservative Party or the country … many people will feel reluctant to give continuing support to that Government. The Daily Mail leader simply said, "What a pantomime". It was indeed a bizarre performance. The Government are confused and at times confusing; they are at odds over Europe, and it appears that certain Ministers are positioning themselves not for the general election but for the leadership election that is to follow.

Confusion over Europe has been replicated on economic policy. This is, after all, the Government who sent Britain spinning ignominiously out of the exchange rate mechanism, and the Prime Minister is the former Chancellor who recommended that we joined the ERM at an exchange rate that became unsustainable. That is history.

Mr. Iain Duncan Smith (Chingford)

As the hon. Gentleman has touched on the moment when we left the exchange rate mechanism, will he clarify on the record exactly what his colleagues' position was at that time? Did they want us to stay in the ERM or to leave; to hike interest rates or to lower them? It is important to get that on the record.

Mr. O'Brien

As I have just said, that is history. Our view was that, if we were going to enter the ERM, we should do so at a sustainable level, for the right reasons and at the right time. The then Chancellor, who is now the Prime Minister, decided to enter for the wrong reasons, at the wrong time and at the wrong exchange level. He decided to enter because, as everybody knows, he had managed to convince the then Prime Minister, who was on her uppers, to accept entry.

That was the political reasoning behind the economic judgment. The decision was made not in Britain's economic interest, but through concern about the future of the Conservative party. That is how economic policy and European policy have been approached in the past decade.

Mr. Tony Marlow (Northampton, North)

rose—

Mr. Richard Shepherd (Aldridge-Brownhills)

rose—

Mr. O'Brien

I know that many hon. Members want to speak, so I will give way once more to the hon. Member for Aldridge-Brownhills (Mr. Shepherd).

Mr. Shepherd

Does the hon. Gentleman not recall that the entire leadership of the Labour party at that time, including the late lamented John Smith, passionately believed in membership of the exchange rate mechanism? At the time of the difficulties caused by the rate, the Labour party passionately espoused our continued membership, and argued that interest rates would go up if we left. That time should be remembered in that context. Members of the Labour party are the greatest arguers now for entry into a form of ERM that would be set in concrete—monetary union.

Mr. O'Brien

The hon. Gentleman should remember that the leadership of his party said that sustaining membership of the ERM at the rate in question was the basis of its whole economic strategy, and it failed. The economic strategy on which the Tories went to the country in 1992 failed a few months later. It failed in many ways. Yesterday, the Library published an interesting and amusing snapshot analysis that showed that Britain would not hit the criteria for monetary union. It suggested that only Luxembourg and Ireland are on course for a single currency. Some single currency.

The Government have made great claims for their economic performance in their attempts to meet the Maastricht criteria. The reality is different. On inflation, last year we were 11th out of 15 in Europe: we were in the bottom half, and below the European average. On gross domestic product per person, we were ninth in Europe. On growth, between 1979 and 1995, we were 13th in Europe. On industrial production, in the same period, we were 12th out of 14 countries. On investment, we were at the bottom. Indeed, for the first 14 years of Tory government, we were at the bottom of the Organisation for Economic Co-operation and Development's league of 25 countries. On interest rates, we were 11th. On unemployment, we were eighth out of 11.

The Prime Minister promised to make Britain the enterprise centre of Europe. Like his promises on tax, that promise has been broken. A recent report by economists Ray Barrell and Nigel Pain shows that foreign investment in France, between 1991 and 1995—the period that the Government like to look at—was $19 billion, or £12 billion, compared with Britain's $17 billion. At the same time, British firms invested $25.4 billion in Europe and abroad, making Britain a net outward investor. France, with the social chapter and an increased minimum wage, was more attractive than Tory Britain to many foreign investors.

The divisions in the Conservative party mean that it is incapable of advancing Britain's national economic interest. The Tories have failed on the economy, and have failed to get the best deal in Europe. The civil war in the Tory party means that it has put at risk the 3.5 million jobs and the huge investment that depend on our membership of Europe.

The re-election of the Conservatives would bring an influx of more Euro-sceptic Members to continue the civil war over Europe, and the victim would be British interests in Europe. Some Tories have gone dangerously far. For many of today's Euro-sceptics, being pro-British seems to mean being anti-European. They seem to think that, if someone is pro-European, he is un-British. Their rhetoric continually assails EU institutions as some sort of doomed failure. How can we make Britain successful in Europe when the Conservative Government continually undermine our involvement?

Euro-sceptics in the Conservative party seem to be of two sorts: those who plain do not like Europeans and want Britain to be detached and isolated; and those who regard the European Union as a free trade area, want no further integration, and want Britain to move from being a close participant to being a loose associate. Both aspirations are unrealistic.

In the modern world, nations are more interdependent than independent. Trade between nations is increasing at double the rate of growth among nations. The idea that Europe's future lies in a loose free trade area was the illusion of the 1950s. We had to admit that it did not work, and we traded in membership of the European Free Trade Association for membership of the Common Market.

Mr. Christopher Gill (Ludlow)

Will the hon. Gentleman give way?

Mr. O'Brien

I shall not, because many hon. Members wish to speak. I have already given way twice. It would be better if hon. Members sought to catch the Chair's eye in due course.

We traded in EFTA membership for the Common Market because EFTA alone was not working. Today, the European single market goes beyond a free trade area. It includes policies for social cohesion that make it acceptable. It has a co-ordinated external policy that gives us clout in world trade negotiations. It gives us a common competition policy and standards of safety that benefit working people. Moving from full participant to loose associate would deter inward investment, prejudice our position in financial services and harm the City of London.

Many in the Conservative party are seeking to repeat Labour's mistakes of 1983. Then it was suggested by the Confederation of British Industry that Labour's policy of disengagement would put 2.5 million jobs at risk. That was when 44 per cent. of our exports went to our European neighbours. Our trade and jobs links to the EU have increased: more than half our trade and 3.5 million jobs would be put at risk by the policy of a Euro-sceptic Conservative Government.

I am sure that the Chancellor of the Exchequer shares our view that the Euro-sceptics in the Conservative party are job destroyers, who would put at risk British business relationships with Europe. Continued EU membership is essential for open access to Europe's markets. Leaving would horrify our business community and create new obstacles to European markets. It would cause job losses and shrinkage of inward investment. Being pro-British does not require us to be anti-European, but it can require us to lead in Europe for Britain.

The prosperity of Britain depends on the skill of its Government in making a success of our membership. We export more goods to Germany than to the United States or Japan; more to Holland than to all the new economies of the far east. Britain's membership of the largest, most prosperous market in the world gives us powerful leverage in trade negotiations with the rest of the world that we would not possess in isolation.

We can get more out of the European Union by co-operation than by confrontation. We cannot be a success in Europe if we reduce Britain to the margin of the debate and become hecklers from the sidelines. That is why the bosses of Unilever and Toyota are so concerned about the lurch to anti-Europeanism in the Tory party. Niall FitzGerald of Unilever said that continuing the current negative approach to Europe would lead to reconsideration of certain investment decisions. If the UK was gently floating off into the Atlantic, we'd have to reconsider things. In the modern high-tech, fast-moving global economy, the Conservative world is still rooted, in many ways, in the model of independent nations that belongs to the last century rather than the next. In their hearts, many Conservatives know that; certainly the Chancellor of the Exchequer knows it. I thought that the Prime Minister knew it. Before the Euro-sceptics put an armlock on him, he began this Parliament by saying that it was wrong for Britain to stand on the outskirts of Europe as an island tossing bricks into it. Today, he is finishing the Parliament trying to prove that he is better at tossing bricks than the hon. Members for Billericay (Mrs. Gorman) or for Stafford (Mr. Cash).

Our relations with our European neighbours are in crisis because there is a crisis of leadership in the British Government. The Prime Minister and Cabinet repeatedly give priority to pandering to the prejudices of their party rather than to serving the interests of British business or the British people. That is why both the people and business are realising that they would rather trust the judgment of a Labour Government, based on a hard-headed assessment of economic reality, than risk being taken by the Conservatives down a path dominated by hysteria and prejudice. So concerned are they that they see the internal civil war in the Conservative party becoming much worse if the Government are re-elected to a fifth term.

Increasingly, and despite the Chancellor, the Tory party is the anti-European party. If anyone had said in 1972 of the Conservative party which took us into Europe that, in 1996, senior Tories would be seriously contemplating leaving Europe, few would have believed it. Labour's view is clear. We cannot afford to hover half in and half out, heckling from the sidelines and sending out search parties to find issues on which to attack Europe, purely for domestic propaganda; failing to take participation seriously and leaving empty chairs at negotiations on social legislation.

Mr. Marlow

Shall we just take our orders from Brussels?

Mr. O'Brien

I tell the hon. Gentleman that Labour opposes a unitary, federalist or centralised European state—a sort of united states of Europe. We seek co-operation between member states, based on a common enterprise. We believe that subsidiarity can decentralise power. We do not believe that the European Union presents any threat to our culture, our institutions, our language or our character.

Labour believes that the Maastricht treaty should remain a treaty between independent nations that pools sovereignty by agreement, rather than represent the consolidation of some sort of European super-state. We want an inclusive union. We prefer greater subsidiarity to the large-scale extension of the competence of any of the European Union institutions.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

Will the hon. Gentleman give way?

Mr. O'Brien

I have said that I will not give way, for the reasons that I have stated.

There is no danger of a European super-state—the different cultures and national histories in Europe are too strong. I agree with the Prime Minister's assertion that to see the single currency as a step towards federalism is "unrealistic". The dire warnings of some Euro-sceptics are often hyperbole bordering on the absurd. There is and ought to be a debate about the nature of Europe, whether there should be a single currency and the relationship between the nation states and the Union; but the terms of that debate as reported in our national media have so far produced more heat than light.

The fact is that Labour's position on the single currency is almost entirely the same as that of the Chancellor—I cannot say that it coincides with the Cabinet's view, because members of the Cabinet seem to have several different versions of the policy. Both the Chancellor and the Labour party are pro-European, but not federalist. We are not opposed in principle to a single currency, but we understand the practical difficulties. The Chancellor and Labour disagree on the social chapter, but we are not far apart on monetary union.

Mr. Marlow

What about Ted Heath?

Mr. O'Brien

The hon. Gentleman asks from a sedentary position about the right hon. Member for Old Bexley and Sidcup (Sir E. Heath). I was delighted to hear—

Mr. Oppenheim

Will the hon. Gentleman give way?

Mr. O'Brien

Let me respond to the hon. Member for Northampton, North (Mr. Marlow); then I shall give way.

I was delighted to hear the comments of the right hon. Member for Old Bexley and Sidcup at the weekend that he, as the last but one Conservative Prime Minister, endorses Labour's views on the social chapter, devolution and the minimum wage. Both the Chancellor and Labour want to keep this country's options open on a single currency.

Mr. Oppenheim

rose—

Mr. O'Brien

I wonder whether the Minister can say that he is not a Euro-sceptic, and that he agrees with his Chancellor on the Government's policy. I suspect that he will not.

Mr. Oppenheim

I thank the hon. Gentleman for giving way, 16 minutes into his opening remarks in a one-and-a-half-hour debate. He said earlier that the Government's position on economic and monetary union was confused and confusing, and he has just stated the Labour party's policy. In the debate on this subject almost exactly a year ago, he said: Unlike the Government, Labour has a clear principle to guide it". He also said: The position of the Labour party on European economic and monetary union is quite clear. We approve the principle of economic and monetary union". Does he still stand by that statement?

Mr. O'Brien

The Chancellor has repeatedly said—

Mr. Oppenheim

Will the hon. Gentleman give way?

Mr. O'Brien

Will the Minister sit down and let me answer his question?

The Chancellor has repeatedly said that he does not oppose the single currency in principle, and I say that we have made our position clear all along. The Labour party and I take the view that we are not opposed in principle to a single currency. I understand that that is the view of the Government, and it is the view of the Labour party.

Mr. Oppenheim

I will read the words again carefully, so that the hon. Gentleman can give a straightforward answer about whether it is still the Labour party's policy and his own view. He said: The position of the Labour party on European economic and monetary union is quite clear. We approve the principle of economic and monetary union".—[Official Report, 12 February 1996; Vol. 271, c. 772.] Does the hon. Gentleman stand behind those words? Is that still Labour's policy?

Mr. O'Brien

Is it not also Government policy? Is it not the Government's policy to say that they are not opposed to a single currency in principle? The Labour party is saying clearly that we are not opposed to a single currency in principle. There are many advantages to a single currency, such as reducing transactional costs, stability in the currency in the long term, and many others.

We must also be aware of the practical difficulties. The Labour party has set out quite clearly the fact that there are some practical difficulties that we have to bear in mind. Labour has made it clear that any decision will not only involve applying the Maastricht criteria: does the Minister agree that there should also be British criteria?

Let me set out the criteria clearly. What is to be the likely impact on investment by British firms in Britain and Europe and on inward investment into Britain? What would be the effect on our financial services? Are the various European countries at different stages of the economic cycle, and what impact would that have on our economy? Is there sufficient flexibility to respond to any problem that may arise? What would be the impact upon employment? The jobs issue is crucial for Labour; is it crucial for the Government? Unfortunately, so far the European Union has talked about employment but has not done enough.

Europe cannot be well placed to be a successful union on the backs of 17 million unemployed. Our vision is not of a Europe of bureaucrats or politicians, nor just of a Europe for business—although we want business to succeed and prosper. Our vision of Europe is of a community for ordinary people. That means jobs for people.

We want workers to have rights at work, and that is why we will sign the social chapter and join our European partners in having a minimum wage. That is why we have made it clear how we will determine what is in Britain's national economic interest. We will take a hard-headed look at the economic practicalities of the single currency and how it will affect the ordinary people of Britain.

Mr. Charles Kennedy

Will the hon. Gentleman give way?

Mr. O'Brien

I have said repeatedly that I am trying to make progress. The Minister has already suggested that I am taking too long.

Mr. Kennedy

rose—

Mr. O'Brien

I will give way to the hon. Gentleman, but this is the last time. I am about to finish.

Mr. Kennedy

I have been listening with great interest to the hon. Gentleman, and, although I do not disagree with the general pro-European sentiments being expressed, I am less than enamoured with the manner in which they are expressed. The hon. Gentleman set out the British criteria under a putative Labour Government. Is it the Labour party's negotiating stance for the completion of the intergovernmental conference that those criteria should be part and parcel of any subsequent decision that is taken?

Mr. O'Brien

The single currency issues will be determined apart from the IGC.

Mr. Kennedy

rose—

Mr. O'Brien

Perhaps the hon. Gentleman would clarify his question, because I do not understand it.

Mr. Kennedy

Perhaps I am not making it clear. Although the single currency issue is not folded into the IGC discussions, is the hon. Gentleman saying that the Labour party's stance would be that there could be no agreement at the IGC without those criteria being met subsequently?

Mr. O'Brien

I think that the hon. Gentleman is still, to some extent, confusing the single currency issues with the IGC.

We are setting out criteria by which we will judge whether to enter a single currency, and, if so, at what time. That is the purpose of setting out the criteria. I still do not quite follow the hon. Gentleman's question, but perhaps he will talk to me afterwards, when I can explain the difference between the IGC and the single currency.

No sensible Chancellor could close down the options, especially in an area which has over half our trade and 3.5 million jobs dependent upon it. Getting it right is more important than getting it quickly. That is why there is a triple lock on any decision. Not only the British opt-out, but the vote of the British Parliament and the referendum of the British people make up the triple lock. The decisions will be made by Labour in Britain's interests, to meet British needs, after a cool and hard-headed assessment of our national economic interests.

Within three months, the people of this country will decide on the Government to take Britain into the 21st century. The choice will determine the shape of Britain's relations with our European neighbours for a generation. The choice is whether Britain will go forward with Labour to be a leading force in shaping the future of Europe, or turn in on itself with the Conservatives to become a country at the margins, for ever left behind.

4.14 pm
Mr. Quentin Davies (Stamford and Spalding)

We have just heard the most extraordinary speech from the hon. Member for North Warwickshire (Mr. O'Brien). Not only is he apparently incapable of giving a straight answer to any question, but he could not even tell the House whether he stood by his own words in the Chamber a year ago.

The British people cannot possibly be tempted to put the government of this country in the hands of politicians who conduct themselves in that way. I have never heard a less inviting prospectus for any candidate for the government of Britain than the hon. Gentleman's speech. Such indecisiveness and mealy-mouthed ambiguity are the hallmark of so many speeches that we hear from the Labour Front Bench.

It comes a bit rich from Labour Front Benchers to deliver homilies in favour of the European Union and the European single market, when we know perfectly well that had the British people elected Labour to power in the 1980s—in their wisdom, the British people did not do so—we would not have been part of the European Union. There never would have been a single market. Even the present Leader of the Opposition, the right hon. Member for Sedgefield (Mr. Blair), fought the 1983 election on a programme of getting out of the European Community, as it then was.

I must not use unparliamentary language, but there must be real doubts in the minds of the British people about the sincerity of a great many statements made by Labour Front Benchers. It is clear that the Labour party's new-found enthusiasm for the European Union and the single market is just part of the parcel—of a purely cynical attempt to gain power at any expense, and to change Labour's marketing strategy to embrace the whole range of Conservative policies, because those policies have so obviously worked and carry the confidence of the country.

The only way in which the Labour party can hope to form a Government again is by trying to persuade the electorate that it has adopted our policies and is capable of implementing them. That is a thoroughly implausible proposition, and the hon. Gentleman's speech today gives little confidence that the Labour party would be capable of pursuing any consistent line of policy on any subject, if ever it came to power.

The decisions of Conservative Governments at the relevant time, to enter the European Community, as it then was, in the 1970s, to establish the Single European Act, which set the framework for the single market in the 1980s, and to sign up to the Maastricht treaty in the 1990s, have been magnificently vindicated by events. Britain has gained enormously from the single market.

I have not yet seen any trade figures for the whole of 1996, but the figures for 1995 showed that our exports to the rest of the single market increased by 18 per cent. In the first year of the single market's full operation in 1993–94, our exports had risen by 11 per cent.—vastly more than our trade as a whole.

When I go round businesses in my constituency in Lincolnshire, as I do almost every Friday, I see how many small and medium-size businesses, especially in manufacturing, food processing and food wholesaling, are for the first time selling across the water, particularly in the Benelux countries and often in France and Germany. If Britain has had a fine economic record over the past several years, the single market has played a major part.

The single currency is a highly emotive issue. Therefore, it is extremely difficult to debate the subject rationally either in the House or elsewhere. I regret that, as it will be necessary for the British people to take a careful, cool and rational decision in a referendum—which is what we have promised them—on this important matter. A single currency clearly has considerable benefits for trade, business, the development of a single market and travellers. Those facts are not in dispute. However, the essence of the whole monetary union programme is that we would give up the option of devaluing in the future and commit ourselves indefinitely not to run fiscal deficits above the level of excess deficits as defined in the treaty—it may be 3 per cent. or perhaps 2 per cent. under a stability pact.

I understand that some people do not want to give up those freedoms. Others believe that it would be splendid to resist those temptations—it would be rather like an addict giving up heroin, which would be locked away permanently. We shall have that argument in the next Parliament, I hope in a cool and a detached manner. The British electorate will have to evaluate the considerable economic stakes very carefully when the time comes. It will be important to listen to the voice of business: to those who are responsible for their companies' fortunes and who take decisions about investment patterns that will determine our prosperity and employment opportunities.

Mr. Nigel Spearing (Newham, South)

In dealing with these matters in a calm and rational manner, the hon. Gentleman achieves what most hon. Members can only attempt to do. Does he agree that economic and monetary union involves two aspects: first, the principle itself; and, secondly, the convergence criteria, which he has touched upon—the 3 per cent. and the 60 per cent.? We heard yesterday about the proposed privatisation of London Underground. The Secretary of State claimed that public investment would "score", but that private investment would not. The hon. Gentleman is knowledgeable in such matters. Will he explain why Treasury money that might be invested in London Underground would count against the 3 per cent. and the 60 per cent. convergence criteria limits, but private borrowing would not? If that is so, how would precisely the same work on the same trains in the same tunnels in the same city prevent our joining EMU on the one hand, but favour our joining on the other? If my description is correct, is that rational?

Mr. Davies

If I may return the compliment, the hon. Gentleman has always played a particularly distinguished role in discussions on this subject in the House. I always enjoy debating the matter with him. I have never known him to turn up to a Committee without first doing his homework—and one cannot say that with confidence about many hon. Members. If it is possible to say that I shall regret the departure of a Labour Member of Parliament, I shall regret the fact that the hon. Gentleman will not be participating in future debates on this subject.

I refer to public and private investment—and I think that my answer will not surprise the hon. Gentleman. There is all the difference in the world between investment undertaken in the public sector and that undertaken in the private sector. Public sector investment is not necessarily undertaken according to commercial and economic criteria. The resources used for investment in the public sector are drawn compulsorily from the public through taxation—no one has any choice in the matter. In the private sector, if one wants to invest, one must persuade one's shareholders, lenders or other stakeholders to provide the money. There is a natural discipline that is absent from the public sector.

It follows that it is potentially dangerous to allow Governments to spend large amounts and to call it investment expenditure. If we allow the private sector to undertake commercial investments of the kind that the hon. Gentleman mentioned, in London transport or in any other field, we may be certain that those investments will be justified according to economic criteria. If they are not, the financial markets will not make the money available. There is a real conceptual distinction and a sensible discipline that is reflected in the way in which we have always taken public spending—whether as investment or consumption—into account in the public sector borrowing requirement. I believe that Eurostat will do the same for the purposes of calculating public expenditure under the convergence criteria.

I am sorry that the hon. Member for Newham, South (Mr. Spearing) referred to my reference to the fiscal deficit rule as merely part of the convergence criteria. It is, of course, one of the essential convergence criteria, but the obligation permanently to maintain fiscal discipline is at the very essence of monetary union. It is necessary to underwrite the stability of monetary union. It is extremely important. We shall argue on future occasions whether it represents a net gain or a net loss to economies to give up that particular freedom.

Mr. Spearing

Will the hon. Gentleman give way?

Mr. Davies

No. I know that the hon. Gentleman would like to catch your eye, Madam Speaker, later in the debate to pursue these important matters.

Before I leave monetary union, it is important to emphasise that although it implies constraints on Governments' borrowings, absolutely no constraint is implied at all on what Governments can spend or tax. By definition, as the deficit is limited, if Governments wish to spend, they will have to raise the current revenue to finance that spending. To some of us, that is a great gain not only for the economy, economic stability and sound finance, but for democratic accountability, because Governments will not be able to return to the habits of the 1970s, when the Labour Government made entirely irresponsible spending promises to the electorate, and delivered them not merely by increasing taxation—heaven knows they did that, and by more than enough—but by borrowing and running the public sector borrowing requirement up to more than 12 per cent. of gross domestic product. That was a scandalous level. We now hear self-righteous speeches from both sides of the House, denouncing the Italians for running an irresponsible public deficit that is half the level that the Labour party had in the 1970s.

The purpose of today's debate is to approve the Government's sending to the European Commission the analysis of the British economy contained in the Red Book. It is clearly a matter on which the hon. Member for North Warwickshire was not going to touch, because the Red Book presents the most formidably successful story of any economy in living memory in western Europe. We have had five years of constant growth. Unemployment has fallen by more than a million in the course of three years. I challenge Opposition Members to tell me of another western European country that has been able to reduce unemployment by that amount in that period.

We have been able to reduce unemployment without running into inflationary or balance of payments constraints, which always happened when a Labour Government were in power, because as soon as demand increased steadily for a year or two, the British economy could not supply the goods and services demanded, so we sucked in imports. There has been a genuine supply-side revolution in this country, and that is testified to by the extraordinary way in which the balance of payments has not gone into significant deficit, despite five years of continuous growth.

Mr. Mike O'Brien

rose—

Mr. Davies

I shall give way briefly to the hon. Gentleman, because I referred to him.

Mr. O'Brien

The hon. Gentleman is indulging in a pantheon of success for the Conservative Government, but does he accept that the level of unemployment is almost double what it was when the Conservatives came into office in 1979?

Mr. Davies

The hon. Gentleman knows perfectly well that the structural level of unemployment throughout western Europe has increased substantially over the past 20 years. I hope that we shall have the support of the Labour party in taking the measures that are likely to reduce the structural level of unemployment in this country, particularly reform of the benefits system. So far, all that we have had from the Labour party is a lot of promises that would make the position far worse and increase structural unemployment in this country, particularly by introducing the minimum wage. I cannot think of a more disastrous and ill-conceived policy, either from the humane or from the economic point of view.

I commend the report to our partners in the European Union. They will find it extremely interesting reading, and it will be one more piece of evidence likely to persuade them that the British model under Conservative Governments delivers employment, delivers prosperity, and delivers investor confidence in modern conditions better than any others currently on offer.

4.29 pm
Sir Teddy Taylor (Southend, East)

It was interesting to hear a series of soundbites about Europe from the Opposition, rather than specific answers to specific questions. We must put the Labour party right on its view that Britain is alone in having doubts about the way in which Europe is going on economic affairs. All the evidence shows that throughout the continent there is a sudden awakening of concern and alarm about what the European Union is doing to people.

I can do no better than to quote from one of the splendid papers that I am sure Labour Members read, called The Guardian, in which it was reported today that 77 per cent. of the people of Germany are now opposed to economic and monetary union. That is not 10 per cent., 20 per cent. or merely a handful: the great majority of the people of Germany do not want it.

I was also interested to read in that article that a gentleman called Gerhard Schroder, who is an important person—he is a state premier—is planning to challenge Mr. Kohl for the chancellorship next year on a Euro-sceptic platform. In today's Der Spiegel, which is an important magazine, he said: You have to be able to stop a train which is running in the wrong direction. The hon. Member for Rotherham (Mr. MacShane) shakes his head. He can have this article: that is what the bloke said, and that is the truth.

Mr. Denis MacShane (Rotherham)

I do not want to enter into a discussion about Mr. Schröder's politics, but he is a nationalist. His speeches in Germany are profoundly nationalistic, and he alarms many people, although he is in our sister party.

Is the hon. Gentleman aware that, in the early 1980s, every opinion poll showed that three out of four British people wanted to withdraw altogether from the European Community, as it then was? That was official Labour party policy in 1983. Does the hon. Gentleman recall which party won the election in 1983, when the British people, according to opinion polls, were wholly opposed to the European Community?

Sir Teddy Taylor

That is the most depressing thing I have heard in a long time, and I have been in the House for 30 years. The hon. Gentleman is saying that we should go along with what people seem to be thinking so as to win elections. It is scandalous if the hon. Gentleman has come to Parliament only to support what he thinks people are saying today. I am not making a personal attack on him: I just hope that he will wake up, think about telling the truth and give guidance on what is right.

Mr. MacShane

Will the hon. Gentleman give way?

Sir Teddy Taylor

No, get lost. I am trying to make a brief speech on important issues.

We must wake up to the fact that throughout the continent of Europe, people are realising that something nasty is happening to them. The hon. Member for Rotherham may laugh, but it is not funny for the 5 million people on the continent of Europe outside the United Kingdom who have lost their jobs in the past five years.

My hon. Friend the Member for Stamford and Spalding (Mr. Davies) referred to our trade success. What about the facts? The plain fact is that since we joined the EC, we have had a deficit of £100,000 million, which is a lot of money. I wish that, instead of making European slogans, people would wake up to what is happening.

I have great respect for the hon. Member for Rotherham, but I wish that people would listen to what the bunch of people who come along to these debates, in which no one is interested, have been saying for some time. We may not be terribly clever, but a small group of us—almost all of us are here now—voted against the exchange rate mechanism, because we believed that it was a recipe for mass borrowing and unemployment. People said that we were nuts and silly. We all know what happened: our pathetic Ministers pleaded that they were terribly sorry, that they could not borrow any more money or add to unemployment, and had to chuck the ERM.

We should realise what is happening in France. It is a lovely country, but more unemployment is being created every day because of the absurd nonsense of an artificial exchange rate. Surely Conservatives, of all people, accept that if we pretend that something is worth what it is not, we create distortions. As we see from the Red Book, the greatest problem of all is the distortion created by the agriculture policy, which does not allow food to find its normal price. Clever people in their blue ties, probably supported by public opinion polls, say, "Let us decide what the price of beef and sugar will be." All that we do is spend more and more each year on destroying food and forcing up prices for low-income households who have suffered enormously from the effects of the common agricultural policy.

When I hear representatives of the Labour party talking about "the Europe of the people", I ask them, in all sincerity—as people whose party used to justify democracy—what the blazes people in Europe can do if they think that the CAP is a foul protection racket that is costing enormous sums in waste and destruction, which gives them no entitlement and no rights. Destroying democracy is particularly bad for this country.

Let me make two brief points. The Minister said, "We must tell them what they are doing." I read through the articles in these wretched treaties: that is probably why I do not sleep well at night. The trouble with European treaties is that they can always be stretched a great deal further. According to article 103(4) of the Maastricht treaty, the European Union is not just interested in what we are doing, and how brilliant the Government's economics are; it wants to find out whether our economic policies are inconsistent with the broad guidelines, and may jeopardise the proper functioning of economic and monetary union.

What on earth does that mean? Does it mean that the Government have an obligation—as I believe they have, under the treaty—not only to run the economy in accordance with the principles that have been laid down, although that means deliberately creating unemployment, but to implement policies that will not in any way frustrate the operation of economic and monetary union? To some extent, our policies are doing that. Unemployment in all the other European countries is rising, while ours is falling, and our sound pound is probably having a frustrating effect. That is not helping those countries at all.

It is clear that, under another funny little clause—paragraph 7 of article 104c—Her Majesty's Government do not tell the House of Commons what the Europeans say about the information that we have sent to them. I think that that is the least that the House of Commons is entitled to: surely, when we send our annual information bulletin to Europe, we should be told what the Europeans say in reply to the Government. If, for example, they say to the Government, "We think that you are spending too much on this or that, or borrowing too much," or, "We think that your promises will lead to all kinds of problems," should not the House of Commons be told? I hope that the Government will give an assurance that, notwithstanding paragraph 7 of article 104c, they will endeavour to report back to Parliament any recommendations made by the European Council on the management of the United Kingdom economy. If the Minister can say yes to that, I shall be very grateful.

Will the Government also give an undertaking that Her Majesty's Government will seek to initiate a review within the European Union, of the merits of seeking economic advice from nations that have created an economic nightmare and massive unemployment in their domestic economies?

I have quite a lot to do with Sweden. Being a Tory, I have a massive number of important business interests, one of which is a directorship of a wonderful company called Ansvar Insurance. Ansvar Insurance insures total abstainers from alcohol, a cause that I have always promoted because I signed the pledge in Glasgow when I was six—and, like all Conservatives, I have kept my promise ever since. We do not pay the directors a great deal of money, but we give a great deal of support to the temperance movement.

I am astonished at what has happened in Sweden. The people there were told by the clever people—the equivalent of our silly Confederation of British Industry—"Let's vote yes in the referendum to safeguard employment and prosperity." Of course, the poor old Swedes voted yes, by 51 to 49 or thereabouts. I just wish that the EU enthusiasts would visit Sweden today. The situation there is tragic: everything is going wrong. Taxes are rising, public spending is being cut, and things have gone from bad to worse since the Swedes listened to the clever people and voted yes. Their friends from Norway go over to laugh at them, and to say, "You were daft." I am well acquainted with public opinion in Sweden, and I know that the massive majority believe that getting involved with the European Union is the worst thing that they have ever done.

The final point that I hope the Minister will bear in mind is that the people who loathe and despise the European Union are in no sense anti-European. Basically, the Euro-sceptics are probably more pro-European than some of the people who shout for Brussels. Basically, we like Europe. We like the comforts of Europe and we deplore what the Europeans are doing to themselves. I just hope that people in all the parties will wake up to what is actually happening in Europe today. There is the absolute tragedy in Germany, where the Germans have created a massive nonsense of unemployment because of a single currency there. They never seemed to consider what would happen. They said to the poor people in East Germany, who of course had lots of problems, "We shall give you the special privilege of making the deutschmark equal to the currency of East Germany." It did not help East Germany. It simply created mass unemployment. It was nonsense and it was silly.

There are also tragedies in France, Italy, Spain, where things are particularly bad, and Belgium, probably the worst of all. I just wish that people would wake up to what is happening, stop trying to convince themselves of silly slogans and realise that what is happening in the European Union is not only bad for Europe and for its people, but destroying democracy and jobs. Some time, people must wake up.

4.40 pm
Mr. Nigel Spearing (Newham, South)

One sometimes goes to public meetings and there is a discussion afterwards. Someone gets up and says, "Mr. Chairman, I did not intend to contribute to this meeting before I came into the hall." I had not intended to take part in the debate until we heard a couple of speeches, particularly that of the hon. Member for Stamford and Spalding (Mr. Davies). Unusually, not many Labour Members wish to contribute. I took his invitation to add a few words. I thank him for his kind words. Although I disagree with him profoundly on politics, dependent on his successor, any non-return of him to the House would be a loss of someone who has, in a sphere other than finance, brought distinction to a particular Select Committee. I shall leave it at that.

I wish to take up the fundamental points on which the hon. Gentleman and I had a brief exchange. The reason why I did not intend to participate was that I intended to listen to a Select Committee that is discussing investment in London Transport, but that is a good illustration of the fundamental issues that we are discussing—economic and monetary union and the criteria with which, to keep their option open, the Government must comply.

I challenged the hon. Member for Stamford and Spalding to make a distinction on the source of borrowing for much needed replacements of tunnels, wiring or signalling—the capital investment that everyone in the House, whatever their party, wherever they sit, whatever they think of the Common Market, recognises is badly needed for the people of London, as no doubt it is required in Paris, Berlin, Stockholm, Copenhagen or anywhere else. Therefore, we are talking about the extent to which, if at all, the criteria that we are discussing—my hon. Friend the Member for North Warwickshire (Mr. O'Brien) mentioned them and the progress towards the convergence criteria—affect fundamental and democratic choices, in this case, of the people of London or of the people of Great Britain, in respect of other forms of public investment.

The hon. Member for Stamford and Spalding did not contest my point that such investment would be virtually identical, wherever the money came from—whether from the Treasury, which would then borrow on the markets by way of gilts or whatever, or from a private firm buying capital or indeed receiving money indirectly from the Treasury, which the Government proposed yesterday. It would be identical investment in identical infrastructure for broadly the same purpose, that is, the transport of people by underground railway in London.

My understanding is—the Minister will correct me if I am wrong, but the hon. Member for Stamford and Spalding did not, so I suspect that I am right—that, if those millions of pounds were added to public expenditure, they would count against the 3 per cent. gross domestic product limit, which is part of the convergence criteria, as expenditure would be to the 60 per cent. GDP limit in relation to total Government borrowing. Those details are in the Red Book.

Chapter 5 of the Red Book, headed "Public Spending", makes it clear that public expenditure is being enhanced by the private finance initiative. Paragraph 5.17 contains an interesting phrase: Public services benefit not just from direct public sector investment but also from capital spending by the private sector under the Private Finance Initiative … Table 5.4 shows total capital spending sponsored by the public sector"— the next bit is important— including the increasingly significant contribution through the PFI. The paragraph refers to capital spending sponsored by the public sector". However, table 5.4 makes it clear that the PFI will play an important part in future. In the estimated outturn for 1996–97, the total public sector capital expenditure is £19.7 billion and the PFI is £1.1 billion. Those figures change to £17.7 billion—that is a drop, presumably at constant prices—in 1999–2000 and £4.3 billion respectively. Perhaps in his winding-up speech the Minister will confirm those figures.

While total public sector capital expenditure will count towards the criteria ceilings, the additional amount via the PFI, which will be substantial if the Government are returned to office and continue with their programmes—and another Government might be forced into them—will not. Effectively, it is all investment in public sector areas. The lack of a fundamental distinction between those two figures is clear in paragraph 5.18 of the Red Book, which states: even these figures can give a misleading picture of the level of investment … When the Government buys services from the private sector, investment undertaken by the companies that provide the services is not counted as public sector investment; very often, however, it involves the formation of assets which are deployed to meet public needs. That means that if a public body has a high proportion of contractors, the capital for those contractors will come from the private sector. Although it may be devoted entirely to public works, it will not qualify for the expenditure criteria. My supposition goes further, because the Red Book states: The boundary of the sector has shifted. The privatisation programme has brought significant qualitative and quantitative benefits from capital investment in industries which used to be predominantly in the public sector. My remarks are fundamental to our debates, and relate especially to hon. Members who may prefer public and private expenditure in any combination. Is it not true that the nature of the criteria for qualifying for economic and monetary union, about which one can argue—it is either a necessity or the limit—is distinct from the principle? I maintain that these are two different but complementary issues. Will they not affect the degree of public and private investment and control, and the boundary of which the Red Book speaks? However, they do not alter, as in the case of London Underground, the sums that are involved, or—given that they are roughly equivalent—the degree to which they affect the country's economy.

Why are the criteria there? I can only conclude, as the hon. Member for Stamford and Spalding made fairly clear, that those who set the criteria and who sustain and believe in them, understand that they press one way or the other on that boundary between public and private capital. They therefore control the mixture and believe that, inherently, private capital is more efficient and must be maximised, while public investment must be minimised. That is his doctrinaire thesis—although a Marxist would have it the other way round.

The Labour party and many Opposition Members have believed in a mixed economy, and in the most beneficial mixture of both sources of capital. It looks as if the European Monetary Institute's criteria—regardless of whether one is in favour of them—are pressing unfairly in one direction, thus constraining the democratic right of the electorate to choose the balance that they wish.

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

I congratulate my right hon. and learned Friend the Chancellor of the Exchequer on the significant progress that he is making in meeting the Maastricht convergence criteria. The inflation level set in the Red Book certainly meets the criteria as defined in the Maastricht treaty, our debt to GDP ratio is one of the most satisfactory in Europe and the projections for our budget deficit as a percentage of GDP are well within the 3 per cent. level, which my hon. Friend the Member for Stamford and Spalding (Mr. Davies) mentioned earlier in the debate.

My right hon. and learned Friend's progress in achieving the convergence criteria leads me to the recent remarks of Jacques Santer, the European Union President. He said: We have never had such convergent policies in the economic fundamentals, inflation rates, interest rates and so on. In one sense, he is absolutely right; in another, he is absolutely wrong. The United Kingdom is certainly achieving some of the Maastricht convergence criteria, such as that on inflation, and it is making considerable progress towards meeting the debt to GDP criteria. Clearly, the UK will also achieve the overall debt to GDP ratio. In another sense, however, we are in no way convergent with many of the economies of Europe.

I draw particular attention to the fourth criterion, on the currency, under article 109j of the Maastricht treaty. I recommend that hon. Members visit the Library, obtain a copy of the February 1997 inflation report and examine chart 213, which shows the movement of sterling against the deutschmark over the past 14 months. In that period, sterling has appreciated by 22.5 per cent. against the deutschmark. The chart also shows sterling's appreciation, at 4 per cent., against the dollar.

I urge hon. Members who support the idea of a single currency and those who are agnostic—those who do not know whether it would be a good thing and cannot make up their minds on the matter—to examine the chart and to ask themselves two questions. First, what would have happened to the German and UK economies if there had been no exchange rate and they had had the same currencies? What adjustments would have to be made in those economies if there was no exchange rate flexibility? Such an exchange rate movement reflects a realignment of the exchange rate, which reveals underlying pressures within the individual economies.

Mr. Giles Radice (North Durham)

Rubbish.

Mr. Legg

If we did not have an exchange rate, there would be considerable regional booms and slumps and there would have to be significant transfer payments. The chart clearly shows that the German and UK economic cycles are not synchronised, and that the UK economic cycle is much closer to that of the US.

Mr. Quentin Davies

I am afraid that the currency fluctuations to which my hon. Friend referred prove a point opposite to his argument. Sterling fell out of the exchange rate mechanism at a parity of DM2.95. The rate fell at one time to DM2.17 and is now back to, I think, DM2.72—it is certainly over DM2.7. Those fluctuations do not make sense. They do not correspond to fundamentals. We are back almost to where we started, but in the meantime, enormous and gratuitous uncertainty about costs has been caused to traders and to business.

Mr. Legg

I am grateful to my hon. Friend. He has added to my arguments. He has shown that we need considerable exchange rate flexibility. The rate has floated, varying freely in accordance with the market since we left the ERM. The United Kingdom economy has benefited substantially from that. I am afraid that my hon. Friend has strengthened my case.

We have heard that there should not be fudging of the criteria. I urge my hon. Friends to think carefully about that. Many of them say that joining the single currency should be our objective; but when exchange rate fluctuations are pointed out, they say that they do not want to be judged by the fourth criterion. They want to put the exchange rate stability criterion aside. That is a considerable fudge. We should be saying that we need exchange rate flexibility, which is good for our economy. That is one reason why we should not envisage joining a single currency.

The Red Book and the inflation report give a good idea of some of the convergence criteria that we are achieving, but they also show that in no way is the UK economy so convergent with the German economy that they should have the same currency. There are considerable structural differences between the two economies. Can anyone argue that this would be a good time for the UK and Germany to have the same currency when Germany clearly has to deal with substantial structural problems in its economy? The social costs in the German economy are high. Unemployment has recently gone up by 500,000. There are 4.7 million unemployed in Germany, with another 2 million on make-work schemes, and there are very few real jobs in east Germany. It would be economic nonsense for Britain and Germany to have the same currency at the moment.

Those are the economic arguments. However, too much concentration on the convergence criteria obscures what economic and monetary union is all about. Historically, states have adopted single currencies for political reasons, because of a perceived common interest in those states that justified having one Government and one currency. Looking at the convergence criteria obstructs that view. Having a single currency is not just another step in the process of achieving greater economic co-operation, as the hon. Member for North Warwickshire (Mr. O'Brien) seems to think; it is a step that inevitably leads to a single state and a single Government.

My hon. Friend the Member for Stamford and Spalding seemed to swallow that line. He thought that, if we joined a single currency, we would have financial prudence for ever and a day—no longer would it be possible not to have prudent financial policies. He was wrong. The wording of the convergence criteria is flexible. There is no 3 per cent. limit. The deficit qualification says—

Mr. Radice

Will the hon. Gentleman give way?

Mr. Legg

I have very little time. I have already given way. I should prefer to continue making my points.

The deficit qualification says that, if the deficit is only exceptional and temporary, the 3 per cent. limit can be ignored. As we have not yet achieved the holy grail of a 3 per cent. deficit, in which of the four years of this Parliament that we have not been able to achieve a 3 per cent. deficit does my hon. Friend the Exchequer Secretary consider the excess to have been "exceptional and temporary"? That phrase provides the let-out for the European single currency.

Economies cannot operate in a formulaic way. Political judgments will have to be made. In respect of the single currency, political judgments will be made by European institutions. The economy cannot run on autopilot. Bureaucrats and politicians will have to make political judgments. That is why the single currency is becoming more unpopular in the United Kingdom and why more of my hon. Friends feel that we should not go ahead with it.

One would think that the fact that we were achieving the criteria set out in the Red Book would lead to greater confidence on the Conservative Benches that we should go for the single currency, but the reverse is happening: there is more scepticism about the single currency among my hon. Friends, because they realise that a political project lies behind it. They have seen many examples over the past four years of political power having been given up to European institutions. They now understand the political power that would have to be given up along with the currency. The regulations before Christmas concerning the stability pact made that absolutely clear.

Under the conditions in those regulations, it was clear that no delay from national institutions in implementing the excess deficits procedure would be countenanced. That means that the House would have to comply with the directions that it received from Europe concerning levels of spending and taxation, and the ancient rights of the House would be taken away. I believe that the single currency is becoming more unpopular among my hon. Friends because of that wider realisation. They can see the political consequences that lie behind it.

Mr. Marlow

Will my hon. Friend give way?

Mr. Legg

No. I am coming to the end of my speech.

I remind the House of what my right hon. and learned Friend the Chancellor of the Exchequer told the Treasury Select Committee in December. He said: The single currency is a one way option". If we take the single currency, there is no going back.

Last week, the House debated devolution and whether powers could be removed from a Scottish Assembly or Parliament once it had been set up. On the single currency, we have the answer: it is a one-way option and there is no going back. It represents an irreversible transfer of power from the House to European institutions, and for that reason alone it will never go ahead with the United Kingdom participating.

5.2 pm

Mr. Denis MacShane (Rotherham)

I enjoyed the speech by the hon. Member for Milton Keynes, South-West (Mr. Legg), but I could not for the life of me work out whether the convergence criteria were a straitjacket, as we heard previously, or some type of rubber corset inasmuch as they were indefinitely expandable. I was curious about the hon. Gentleman's scenario on what should happen. In effect, he was saying that Europe should disintegrate into 15 separate states, each with its own currency, monetary and, ultimately, trade policy. I do not believe that the single market for which I expect he voted, as did most Conservative Members present, is achievable without a level of co-operation and, ultimately, a single currency. Getting there will be difficult; that is for sure.

I rise in particular to respond to the hon. Member for Southend, East (Sir T. Taylor), who gently invited me to get lost. That is strong parliamentary language. I am Irish and I rise to such suggestions. The hon. Gentleman is friendly on many other issues, but when he used the language of loathe and despise, I found that much more worrying than a passing ad hominem remark. That language, like the language of hostility from the Foreign Secretary last week, reveals something deeper and more worrying in the Conservative party. I shall be interested to hear whether the Exchequer Secretary confirms the Euro-scepticism of which he was boasting in a debate in the House before Christmas, aligning himself with the hon. Member for Billericay (Mrs. Gorman), or whether he chooses to side with his nominal boss, the Chancellor.

One would think from the remarks of the hon. Member for Southend, East that the past 18 years had been a miracle of low unemployment in this country, but some of us who may not have been sitting on the Conservative Benches at the time have memories of when unemployment went through the roof before entry to the exchange rate mechanism. Some of us believe that the lowered unemployment that we have today may not last.

There is also the problem that, if one measured unemployment in this country using the same criteria as Germany and France—the International Labour Organisation criteria—it would be higher. If one included the criteria used by the American Bureau of National Labor Statistics, which includes people who would like a job but cannot get one, a further 2 million people would have to be added to our unemployment total. Those are inconvenient facts; facts washed away by a diatribe against the problems that Europe faces on unemployment.

The fusion of two countries—a third-world country with a third-world economy such as East Germany and a successful West Germany—was bound to cause problems. The hon. Member for Southend, East seemed to imply that Germany should have run with two currencies in one country. I have heard of the Chinese one country, two systems but never of one modern economy with two competing currencies, as he seemed to imply should have been the choice of the German Chancellor and the Bundesbank in 1990.

I invite the hon. Member for Southend, East to be careful about quoting opinion polls. He completely misunderstood what I said. In the early 1980s, every opinion poll in this country showed that a majority of people were for withdrawal from the European Community. That was the policy adopted by my party in 1983, and a fat lot of good it did us. What people say in opinion polls and how they vote are two very different things. When the British people are invited in the forthcoming election to decide between a party that has set forward clear positions to defend British interests but advance in Europe and a party that is full of the language of loathing, despising and hostility, we shall see which way they vote, just as we shall see which way people vote in future elections in Europe. The people of Europe do not want to break themselves down into competing, rivalry-driven states, which is the avenue and vision offered by Conservative Members.

5.7 pm

Mr. Oppenheim

I particularly enjoyed the speech of my hon. Friend the Member for Southend, East (Sir T. Taylor), especially the part when he managed to say something to the hon. Member for Rotherham (Mr. MacShane) that many of us have longed to say for a long time: get lost. I also particularly enjoyed his comments on the common agricultural policy, with which I agree 100 per cent. He asked about paragraph 7 of article 104c and whether we publish the Commission's response. The answer is yes—in the form of a written answer, which is placed in the Libraries of both Houses.

My hon. Friend the Member for Southend, East also suggested that Sweden has suffered as a result of European Union membership. I suggest that the cause of major problems in Sweden is the cumulative effect of years of socialism—very high spending, borrowing and debt. It now has to adopt monetarist policies and policies of fiscal prudence and deregulation to try to turn its economy round.

My hon. Friend also correctly argued that one can like Europe very much but be against the European Union. Those who are pro-European Union often try to tar Euro-sceptics, or those who are hostile to the EU, as hostile to Europe, but that is not always the case.

The hon. Member for Newham, South (Mr. Spearing) is always an assiduous contributor to these debates. He made an excellent point about the nature of public and private investment and how they relate to the public sector borrowing requirement. His comments were absolutely right, except that borrowing by public corporations is excluded from the general Government financial deficit, which is the definition of Government borrowing for Maastricht and convergence purposes, as indeed are privatisation proceeds; so, for the purposes of the general deficit, it makes no difference whether borrowing is private or public.

The same applies to borrowing under the private finance initiative, which would be counted in the private sector, but, even if it was public sector, it would not count as public borrowing for Maastricht or convergence purposes.

My hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) made several points about convergence, with which hon. Members of all parties would broadly agree. He rightly said that convergence had not yet been achieved and that many would argue that it was unlikely to be achieved if European economies continued on their current course.

Mr. Marlow

Will my hon. Friend give way?

Mr. Oppenheim

My hon. Friend will forgive me if I proceed for the moment, as I do not have much time and I want to respond to a number of points made during the debate.

My hon. Friend the Member for Milton Keynes, South-West also made the point that to proceed would ultimately be a political decision, regardless of whether the convergence criteria had been met. That is right, because the Maastricht treaty gives scope for the Economic and Finance Council that will meet next spring, followed by the Council of Heads of Government, to take a political decision; they are not bound by the Maastricht criteria. After that, the stability pact will have a political element. It will not be totally bound by treaty.

Mr. Marlow

We know that the Government are, on balance, hostile to monetary union. If a group of other European countries seeks to go ahead with it on fudged criteria, will the Government seek to block that in the Council of Ministers, as they are entitled to do?

Mr. Oppenheim

No. If other countries wanted to go ahead, even with muddled criteria, it would not be our job to prevent them from doing so. We must go into the negotiations, as we have done, and try to ensure that economic and monetary union is a success, because, in or out, it will affect us in a variety of ways. If our advice is not heeded, and EMU goes ahead without us, it is not our job to block the will of other countries.

The hon. Member for North Warwickshire (Mr. O'Brien) spoke for 24 minutes. Apart from some platitudes about Europe, he spent most of that time criticising our economic performance. I welcome his concentration on the British economy. If it is now so awful, how come new Labour has copied all our policies? The unique selling proposition of new Labour spin doctors seems to be, "Those guys over there have made such a mess of things that we have copied all their policies."

The Labour party has good reason to copy all our policies: we have the lowest debt of any European Union country except Luxembourg and the lowest unemployment by far of any major European Union country.

Mr. MacShane

The figures are not comparable.

Mr. Oppenheim

The hon. Gentleman is wrong, because my figures, which are used for Eurostat purposes, are based on the labour force survey, approved by the International Labour Organisation, and the Trades Union Congress has said that they are wholly reliable.

Our borrowing is lower than that of any other major EU economy. We have the highest growth of any major EU economy. Our current account is close to balance and is in a better state than Germany's. Those points were made well by my hon. Friend the Member for Stamford and Spalding (Mr. Davies).

The hon. Member for North Warwickshire said that our inflation rate was higher than that of some other European countries. He is right: it is 1 per cent. higher than those of Germany and France, which is not surprising, bearing it in mind that our economy is booming, whereas theirs are in a slump. If only Labour could have achieved an inflation rate 1 per cent. higher than the German and French rate, it would have had something about which to boast.

Since 1979, our growth in manufacturing productivity—the crucial indicator of competitiveness—has been the highest in any Group of Seven major industrial country; it has been 50 per cent. higher than the Japanese rate, twice the French rate and nearly three times the German rate. That is why a recent independent report stated that, since 1979, Britain has closed more than three quarters of the competitiveness gap with Germany.

We export twice as many cars as in 1979 and four times the steel. We are now the world's leading pharmaceutical exporter, and we have overtaken France to become the second largest aerospace producer and exporter.

Mr. Mike O'Brien

The Minister keeps referring to 1979. Can he explain why unemployment is double what it was then?

Mr. Oppenheim

My hon. Friend the Member for Stamford and Spalding has already answered that point: structural unemployment is growing throughout the developed world, not only in the European Union but in America, where unemployment is far higher, and in Japan. The difference is that, whereas in the 1970s—when, let us not forget, unemployment doubled under Labour—our unemployment was far worse than the European average, today it is far better, and falling. Relative to our main competitors we are doing far better.

The hon. Member for North Warwickshire mentioned the minimum wage as one of new Labour's great Euro-friendly policies, but he cannot tell the House at what level it would be set under a Labour Government.

Mr. MacShane

Very wise.

Mr. Oppenheim

The hon. Gentleman smiles and says, "Very wise," but through his smiling face we can see the con that is being perpetrated on the low-paid. It is no good his throwing kisses at me across the Chamber: that will not get him very far. He is trying to convince the low-paid that there is some easy, no-cost solution to low pay.

We all want higher wages for everyone, especially the low-paid, but to pretend that there is some easy option and that politicians can dictate levels of pay with the wave of a magic wand is an unpleasant and dishonest con. The only way to increase the pay of the low-paid is to improve education standards and the competitiveness of the economy. That is why pay at all levels since 1979 has risen rapidly in comparison with what happened under Labour, when pay for the lowest-paid stagnated.

I am pleased that the hon. Member for North Warwickshire concentrated on the economy, because the economy will win us the election. Most people realise that, although the Government have made some mistakes, by and large we have got things right. That is why, since 1979, we have closed four fifths of the competitiveness gap with Germany, and why new Labour's unique selling proposition is that we have got so much wrong that Labour has copied all our policies.

Amusing and enjoyable though this diversion across the economy has been, the purpose of the debate is to take note of the Government's assessment. There is nothing sinister in the surveillance that it outlines, and I urge the House to support the motion.

It being one and a half hours after the commencement of proceedings on the motion, MADAM DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 14B.

Question agreed to.

Resolved, That this House takes note with approval of the Government's assessment as set out in the Financial Statement and Budget Report 1997–98 for the purposes of section 5 of the European Communities (Amendment) Act 1993.