HC Deb 23 July 1998 vol 316 cc1249-51
7. Mr. Brian White (Milton Keynes, North-East)

What progress has been made towards meeting the criteria which the Government have set for joining EMU. [50493]

The Economic Secretary to the Treasury (Mrs. Helen Liddell)

The Government are committed to a programme that is in the national economic interest and will help to satisfy the five tests outlined by the Chancellor in his statement in October.

The Government are achieving macro-economic stability through our sound fiscal and monetary policies. We are creating the right framework for low inflation through our reform of the Bank of England and our commitment to monitoring the inflation target in the light of the European central bank's practices. We are ensuring that fiscal rules and deficit reduction plans continue to be consistent with the terms of the stability and growth pact, thereby underlining our commitment to avoid excessive deficit. We are promoting greater flexibility in the United Kingdom by our welfare-to-work programme and our investment in long-term skills.

Mr. White

Given that, in 14 months, the Government have done more to prepare British business for either the threat or the opportunity—depending on one's point of view—of the euro than the previous Administration in the long years since Maastricht, will my hon. Friend explain how she intends to provide the House and the British people with regular progress updates, so that any decision on British entry to the euro can be an informed choice rather than the knee-jerk reaction so typified by Conservative Members?

Mrs. Liddell

The Government regularly publish details of the performance of the economy against which the five economic tests can be measured. My hon. Friend makes a valid point. We have only five months until the introduction of the single currency in 11 countries with which businesses in this country trade. It is quite appalling that the previous Government did nothing to ensure that preparations were in place. Indeed, their actions could have adversely affected the competitiveness of British industry. This Government are doing everything in our power to address that.

Mr. Malcolm Bruce (Gordon)

In the light of the job losses announced by Rover today, does the Economic Secretary not recognise that the overvalued pound is causing serious damage to British manufacturing and threatens tens of thousands of jobs, and that that has been brought about partly by the Government's failure in their fiscal policy to tackle consumers rather than businesses, so forcing up interest rates and the pound? Does she not recognise that the Government have the power and the duty to address that problem, and also to ensure that business has a clearly identifiable timetable for membership of European monetary union so that it can make plans now, knowing that the British exchange rate will be at a competitive level, which at the moment it is not?

Mrs. Liddell

Again, we have publicity without responsibility. The hon. Gentleman is advocating short-term solutions to problems that have to be dealt with in the longer term. It is ironic that that should come from the Liberal Democrats, who voted against all the tax changes introduced by the Government. The sensible thing to do is to get the economy on to the path of long-term sustainable growth. In that way, we benefit the entire British economy, and allow the British people to make a reasoned judgment on whether to join a single currency.

Dr. Lynne Jones (Birmingham, Selly Oak)

My hon. Friend will be aware that in the west midlands we are very concerned about the job losses—up to about 10,000—which will arise as a result of Rover's announcement. Will she and her colleagues tell the Monetary Policy Committee that it is important not to exaggerate the inflationary pressures in the economy and that, with the exception of fat cat pay rises, pay settlements, including those at Rover, have been in line with inflation? Higher earnings have largely been the result of factors such as increased overtime working, which, ironically, has come about because employers are unwilling to take on new staff because of the high and uncompetitive rate of the pound. Will the Minister also tell the Monetary Policy Committee that tomorrow's mortgage interest rate rise will lead to demands for higher pay increases? The sooner we can get interest rates down, the better.

Mrs. Liddell

I must tell my hon. Friend that only last month Rover announced 1,000 additional new jobs in connection with the R40 model that it is introducing. One of the key elements for long-term business planning in this country is to get inflation down and stability into the economy. Some 400,000 new jobs have been created over the past year, and to enable us to build a sustainable economy we need the kind of decisions now being taken by the Monetary Policy Committee, which should have been taken by the Conservative Government. Much of the increase in the value of sterling—two thirds of it, in fact—took place in the lifetime of the previous Government. Conservative Members frequently try to forget that.

Mr. David Heathcoat-Amory (Wells)

As the Government have decided in principle to join the single European currency, and it is now just a matter of timing, does the hon. Lady agree with the National Institute of Economic and Social Research report that came out this morning, which says that the recently announced public spending increases will lead to an interest rate regime that is higher for longer than would otherwise have been the case, and that joining the single European currency in the next Parliament would lead us to join at an uncompetitive rate? According to the report, that will mean a period of very slow growth and price deflation". Is that what the hon. Lady wants to condemn the British economy to, just so that the Government can regain some influence in the European Union?

Mrs. Liddell

The right hon. Gentleman is obsessed with the European Union. Indeed, it was interesting that in the debate on the single currency the other evening, the shadow Chancellor, in response to a question by my right hon. Friend the Chief Secretary about whether he could tell the House under what circumstances a Conservative Government would ever join the single currency, replied: At the moment I cannot".—[Official Report, 21 July 1998; Vol. 316, c. 990.] First it was going to be 10 years, and now the Conservatives cannot say when they would ever join. That means that, even if it were in Britain's national interests, the Conservative party could never, because of its own divisions, say that Britain would join a single currency.

I commend to the right hon. Gentleman page 6 of the NIESR report that he cited, which states explicitly: the inflation outlook remains benign", and that the forecast shows inflation falling below 2½ per cent. per annum by the end of this year, with a modest revival to the target rate in 1999".