Economic and Monetary Union (Hansard, 23 February 1999)

§ The Prime Minister (Mr. Tony Blair)
With your permission, Madam Speaker, I should like to make a statement.
On 27 October 1997, my right hon. Friend the Chancellor of the Exchequer set out the Government's policy on the European single currency. He said that he would publish details of how, should it choose to do so, Britain could join the euro. That became known as the national changeover plan. Today, we publish an outline of that plan as a basis for consultation.
I should like to thank the standing committee set up by the Chancellor to oversee preparatory work on monetary union across the economy. I am most grateful to the Governor of the Bank of England, the heads of the Financial Services Authority and the British Bankers Association, the presidents of the Confederation of British Industry and the British Chambers of Commerce and the general secretary of the Trades Union Congress for their contribution to this work. It has been a truly co-operative effort involving an unprecedented partnership between the public and private sectors. I am particularly pleased that the standing committee welcomed our intention to produce the outline plan that we are publishing today.
In his statement of October 1997, the Chancellor made clear the Government's view that membership of a successful euro would bring benefits to Britain in terms of jobs, investment and trade. He said that, in principle, the Government were in favour of Britain joining a successful single currency, and he set out the conditions necessary to satisfy our national economic interest.
Our intention is clear: Britain should join a successful single currency, provided the economic conditions are met. Our membership is conditional; it is not inevitable. Both intention and conditions are genuine. We believe that it is the right course for the country to resolve this issue for the British national interest, the future of our people and their well-being. It is that national interest that will always come first.
I do not dismiss the constitutional or political issues. They are real. Monetary union is a big step of integration, but so were the Single European Act and the European Union itself. In finance and business, the world is more and more integrated. It is moving closer together. If joining a single currency is good for British jobs and British industry, and if it enhances British power and British influence, I believe it is right for Britain to overcome those constitutional and political arguments and the fears behind them. For the very reason of the sensitivity of those arguments, we have also said clearly that the Government can recommend, but the people will decide in a referendum.
What we announce today is not a change of policy: it is a change of gear. If we wish to have the option of joining, we must prepare. The sheer nature, scale and complexity of the arrangements require considerable time for such preparation. Joining the euro is, for example, far more detailed in its consequences than decimalisation. If we do not start to face this reality now, we will simply not have the practical means necessary to make a choice.
There are those, on the Opposition Benches and elsewhere, who oppose the very idea of a national changeover plan. We can no longer afford to pretend 180 either that the euro does not exist or that Britain should not actively prepare for it. Such a denial of reality does not promote Britain's interests; it betrays Britain's interests.
The euro is a reality. It exists. Eleven out of 15 other European Union members are in it. It represents 20 per cent. of world income—as big as the United States. It will be the currency of 290 million people.
The euro has begun and, on the whole, it has begun well. Of course, these are early days. There will be tests and strains ahead, but the launch was successful. Those who predicted that it would never happen or would launch itself in disaster have been proven wrong. And it will have a major impact on Britain, in or out: that much is obvious. That alone would rebuke those who would like to pretend that it is not there.
Fifty per cent. of our trade is with the euro zone. The launch of the euro means that an increasing number of UK firms are already starting to use the euro—and not just big business such as British Steel, Ford, Philips, ICI and Unilever; surveys by the Treasury's euro preparations unit show that some 45 per cent. of small and medium-sized enterprises in the UK have trading links with Europe, and they are already having to prepare to deal with the euro. The same surveys showed that nearly half all SMEs thought that the single currency would affect their business. Last autumn, some 14 per cent. of SMEs were already planning to use the euro, and the latest survey by APACS—the Association for Payment Clearing Services—shows that 247,000 companies intend to open euro accounts. Eighty-six per cent. of large retailers have suppliers in the euro zone, and 44 per cent. say that they are planning to pay euro zone suppliers in euros from this year. The euro, therefore, is now an everyday reality for British business, large and small.
When we came to office, we took immediate steps to help the country to prepare. Since the Chancellor's statement, the Treasury has run a major information and direct mail campaign for the 1.6 million small businesses in the UK. Some 350,000 copies of the Treasury's business fact sheets have been distributed, and there have been 750,000 requests for the fact sheet leaflet. We have established 12 regional euro forums across the UK, led by senior business people, who are making preparations at local level.
Firms can now pay taxes, file accounts, issue and redenominate shares, and receive certain grants in euros, and Customs and Excise has trained some 10,000 staff to respond to business needs. Small businesses will have the help that they need. The City of London is prepared, and is already taking a good share of euro-denominated business.
These, however, are all preparations for the euro with Britain, at present, out of that single currency. It is also necessary now to prepare for Britain being part of it. If, as we have already announced, we want to keep open the option of making a decision early in the next Parliament to join, we need to step up our practical preparations now; hence the national changeover plan. The public sector will give a clear sign of its commitment to prepare. Each Department now has a Minister responsible for euro preparations, and each will now report regularly on the preparations that are being made. Where computer systems are being upgraded, all Departments will build in euro compatibility where that 181 represents value for money. In the case of the Department of Social Security, the Inland Revenue and Customs and Excise, the scale and complexity of their computer systems make advance preparations critical. Together, those Departments are the main interface between central Government and the business community, and deal with almost every individual in the UK. They may need to spend some money prior to a referendum to make their information technology systems euro compatible, so that we can maintain the flexibility for Britain to make the changeover as quickly and cost-effectively as possible.
It is right that Parliament should be asked to give explicit approval to such expenditures, which will amount to some tens of millions of pounds spread over a number of years. We will therefore include provisions in the Finance Bill and the Social Security Bill that will authorise the spending—and, of course, there will be the normal votes on the appropriation accounts. The Government will be making active preparations for the euro, in the belief that it will be in this country's interests to join in the future should our economic tests be met. Business should start to do the same.
The national changeover plan sets out the range of work involved for different sectors. For example, in the retail financial sector, the British Bankers Association and APACS are leading work with the Bank of England on how to approach the conversion of their core IT systems. The retail sector more generally will be working, with consumers and suppliers, on a detailed code of practice on arrangements for the changeover. Businesses, large and small, need to focus on the impact of the euro on their business strategies.
On the basis of that work, and after studying the experience of the first wave of participants, the outline plan that we are publishing today shows that it is possible to streamline the timetable adopted in Europe, with no disadvantage to our economy and some benefit. Overall, we believe that it should be possible to move in four months, from a Government decision to a referendum; and, in 24 to 30 months, from a positive referendum result to the introduction of notes and coins. It would be a further six months before sterling notes and coins were withdrawn.
Therefore, the whole process—from a positive referendum result to the withdrawal of sterling—could be completed in about three years, which is considerably faster than the period required for the first wave of monetary union participants. However, a great deal of further work must be done to refine and develop the timetable, and particularly to clarify how soon after a positive referendum result we could actually join monetary union. As the plan makes it clear, we are committed to taking that work forward in collaboration with business and the wider public sector, so that we can produce a further plan in about a year's time.
As for the economic tests that the Chancellor established on 27 October 1997, there is much focus—which is entirely natural—on the politics of the euro project. It is, of course, an intensely political act. However, just as the euro cannot be conceived of except politically, it cannot be made to work except economically. It is, after all, an economic union. We have, as a Government, resolved the political issues in favour of the principle of joining, should the economic tests be met. But they must be met. The manner in which 182 we joined the exchange rate mechanism is a standing monument to the danger of joining a monetary arrangement on purely political grounds.
There are, therefore, two ideological and absolute positions on the euro which I do not share. The first is that of "no, never", which rules out Britain's membership of the euro for always on the ground of constitutional principle. The position is perfectly principled and argues—no matter what the benefits in jobs, industry or even influence—that such a decision is simply wrong, on the ground of sovereignty.
I cannot accept that position, for the reasons that I gave earlier. In the modern world, one has only to look around to see that technology, global finance, mass communication—to say nothing of travel and culture—are coming together. The world is moving together. Sovereignty pooled can be sovereignty—or at least power and influence—renewed. I suspect that, even if we were today to rule out membership in principle and for ever, in a few years, that ruling would itself come under question. In the meantime, we would have lost all influence whatsoever in the economic future of the European Union, of which we will remain a member.
The second position is an unconditional "yes, now". It maintains that economic conditions are meaningless, and that we should join regardless. I believe that economic conditions are meaningful. It is precisely because the conditions are meaningful that we have said, to give some greater certainty to business and the country, that, barring unforeseen circumstances, we would not make a decision in this Parliament to recommend joining the euro.
It is worth, however, summarising the economic tests that the Chancellor established: sustainable convergence between the UK and countries within the euro zone; flexibility to adapt to change in the UK and in continental Europe; the impact on investment and the UK financial services industry; and whether joining the single currency would be good for employment.
Three points should be emphasised. The first is that economic convergence must not be momentary, but, as far as we can accurately foresee, sustainable. We are still at a different stage of the economic cycle from the rest of Europe. However, the difference between our official interest rates and theirs is narrowing. In October 1997, UK interest rates were at 7 per cent, with those in France and Germany at close to 3 per cent. UK interest rates are now at 5.5 per cent, compared with 3 per cent. for the euro area. The difference between our long-term interest rates and their own also is narrowing, and is now down to about 0.5 per cent. Long-term, UK interest rates are now about their lowest for 40 years. Our inflation performance also is consistent with the European central bank's definition of price stability. However, it is essential that convergence is settled and sustainable. We cannot say that yet.
Moreover, for decades we have been prone to far greater swings in the economic cycle than our continental counterparts. It has been boom and bust. That has enormously damaged investment and reduced our ability to grow without hitting an inflationary ceiling at relatively low levels of growth.
Under this Government, there is an entirely new framework for economic management in place. Bank of England independence has at long last given us credibility in interest rate decisions, as well as low interest rates. 183 There are also new fiscal rules which the Chancellor has relied on to slash the £28 billion borrowing requirement and ballooning national debt which we inherited and put us on a path of fiscal prudence. The new framework is a revolution in economic management for Britain. On its foundation, we have put in place measures to boost education, skills, technology and productivity, and measures to enhance the ability of business to grow and prosper. However, we need to get through this more difficult part of the economic cycle and emerge stronger. For Britain to join the euro, it must be from a position of sustained economic strength.
The second point is that these are early days for the euro. It is sensible to see how it settles down and how the ECB steers a path consistent with both strong economic discipline and the avoidance of deflation.
Thirdly, it will take some time to make a clear judgment about whether the direction of economic reform in Europe will enable us to meet the tests that we have set out, particularly on flexibility and jobs.
Europe has a choice. Most of the countries in Europe have high and persistent levels of unemployment. The Asian crisis has brought home to all of us in the EU the fragility of the new world of globalisation. Our world economy is more interdependent than ever. The EU is competing not just with itself, but with the whole world from Asia to America. The single currency alone will not make Europe prosperous. The single currency plus fundamental reform in labour, capital and product markets and in our welfare systems can do so.
Economic reform is crucial, not just to the success of Britain's participation in the euro, but to the euro itself. I understand the worries of those who, while not ruling out the euro in principle, are none the less concerned about the type of euro zone that we might be joining. That is a real question. We must be sure that the EU is moving forwards, not backwards. There are real problems in the EU and Britain can play a part in the solution. The economic reform programme includes the action plans that we started at our Cardiff Economic Council. They require labour market reform through greater flexibility, capital market reform through a European venture capital industry and product market reform through extending competition and strengthening the single market. We are determined that these must be in place. [Interruption.]

§ Madam Speaker
Order. I would be obliged if hon. Members who are conducting running commentaries would desist.

§ The Prime Minister
It would be better if their running commentaries made any sense.
The way to provide social protection today is not more and more regulation or high business costs and taxes; it is through making our work force highly adaptable, more employable and better skilled, encouraging the development of technology, promoting small businesses and making our welfare systems help people off benefit and into work, with specific measures to combat social exclusion. We need a new social model for a new European reality.
I want a Britain strong, economically disciplined, with boom and bust eradicated, flexible, competitive and dynamic. I want us in a Europe that at best is moving 184 firmly in the same direction, rather than trying to hold us back. That is a vision that lets us adapt the European social model to the new realities of global commerce; a vision that binds the EU and America closer together and lets us learn from one another.
We have stated today as a matter of Government policy that in principle Britain should join a successful single currency. That principle is real. The practical preparations that we have set out are real. The conditions—necessary so that we proceed with caution, with common sense and in our own interests—are real. We have set out a vision of Europe's future.
We have a vision, but it is a vision that is practical. We should have confidence in Britain, both in our vision and our pragmatism. I commend the statement to the House.

§ Mr. William Hague (Richmond, Yorks)
Many of us have listened to many statements, but never have we heard such a long list of clichés and verbiage accompanied by so little information.
It was all so simple for the Prime Minister before the last election. Perhaps he recalls his article in The Sun in April 1997, which appeared under the headline, My love for £. Exclusive by Tony Blair. Tony Blair last night declared for the first time he loves the pound. He admitted: 'I know exactly what the British people feel when they see the Queen's head on a £10 note. I feel it too.' [Interruption.] He did not think it was a joke at the time. There were, he said, emotional issues involved in the single currency", and he spoke about his passion for the pound. Has it not been a remarkably short journey from this love of the pound to the plan that he is announcing today to adopt the euro and abolish the pound? Has not the Prime Minister today committed the country to a course of action that is unnecessary, expensive and time consuming, and for which the British voters have never given their consent?
The Prime Minister must know that, if Britain joins the single currency, we risk being unable to run the British economy in the interests of British business. We also risk fundamental political powers—such as the power to tax and spend—being transferred away from democratically accountable British Governments. He must know that there is no sign of the British economy becoming permanently convergent with continental economies. The evidence that he just claimed to give could be equally given for the dollar, as for the euro. That is one of the preconditions that he himself has set for joining the euro.
The Treasury's own study of the economic tests states that the UK economy has become increasingly out of step with Germany and more synchronised with the United States. The document says that, if the UK were to enter monetary union, the loss of domestic monetary policy and the lack of exchange rate freedom could make the UK cycle more volatile. That means more boom and bust—the right hon. Gentleman ought to be aware of that, if anybody is.
Why are there no answers today from the Prime Minister to those fundamental questions? Is it not foolish to embark on a changeover plan without the faintest clue 185 about how the necessary convergence of the economies is to be achieved in the first place? Is it not foolish to do so without knowing why we should want to converge with economies in which one in eight people is out of work in any case?
The Prime Minister has given a long statement without being specific in any way about the costs involved. He referred vaguely in the middle of his statement to tens of millions of pounds of public money. Why will he not say how much money will be spent in the public sector that could have been spent on the education, health and public services that he said he would provide?
Why do the accompanying documents—which I have just seen on coming to the House—give no clue as to what is involved for the private sector? There are two pages about what it means for a corner shop under the heading, "Case Study: A Corner Shop". It begins: A small corner shop sells a variety of groceries and household supplies. It will be mightily pleased to hear that. The document continues: on a given date the shop could simply switch over from giving change in sterling to giving change in euros. It does not say how much that will cost. The only figure mentioned in the whole two pages on a corner shop is £1.99, on the basis that, if we convert from pounds into euros, the shop might not charge things at £1.99 any more.
What use will the document be to businesses? Are not tens of millions of pounds a huge amount for taxpayers and businesses to pay before such fundamental questions are answered? Does not the Prime Minister recognise that most businesses in the country are small and that the thousands of small businesses represented by the Federation of Small Businesses are against joining the euro and will not be persuaded unless they can see greater economic advantage?
Unless the public have decided to join, they should not be forced to spend their hard-earned money on a changeover plan. Is not the money really being spent so that the Prime Minister can show that he is doing his best to sign us up to the euro, parading in front of EU Councils as the man who would join tomorrow if only the stubborn electorate would allow him? Are not the tens of millions of pounds involved a high price to pay for his vanity?
Does not the Maastricht treaty require countries preparing to join the euro to shadow it for at least two years—not to join the exchange rate mechanism, but to shadow the euro? The Prime Minister spent 20 minutes talking about preparing to join without saying a word about the most important thing that one has to do if one wants to join.
Does the Prime Minister have any plans to shadow the euro before the next general election, with all that that means for running our economy according to conditions in other countries rather than in our own? If so, he should come clean now; and, if not, why do we need a changeover plan in the meantime? Why has he produced a changeover plan that talks about computer software and cash registers but is unable to say if or when the Government will do the most important thing?
This morning, the Prime Minister's press secretary claimed that the statement was about giving the country a choice. As he was briefing on the statement several hours in advance, it is a wonder that the Home Secretary has 186 not slapped an injunction on him by now. Is it not the case that, instead of giving people a choice, the national changeover plan is part of a national handover plan, handing over our economic and political freedoms before we have even seen whether the single currency works for anyone, let alone for this country?
The Prime Minister wants to bounce the British people into joining the euro by spending tens of millions of pounds of their money on convincing them that it is inevitable. He says that it is not inevitable, but this whole process is designed to make it so. He wants to change the cash registers, computers and banking systems so that he can turn round and tell the British people that they have no choice but to change their currency.
Does this not all add up to a strategy of pretending to give people a choice while steadily denying and diminishing that choice? Is it not an attempt to lull people into thinking that a nation that has decided its own destiny for 1,000 years is no longer fit to do so? The Prime Minister has built his recent career on being all things to all people and reassuringly facing in one direction while heading off in another. That is the trick that he has perfected, and he has now surpassed himself: while he trumpets his love for the pound, his love for the euro is the love that dare not speak its name.
Would not a Prime Minister who really wanted to give the country a choice set out a viable alternative and show the people that there is another option and that we can choose to make a success of our own currency, as part of the European Union, trading in the euro as we trade in the dollar, in Europe but not run by Europe? Should not he make it clear that for the sixth largest economy in the world to have its own currency is a perfectly viable proposition and set out a strategy for how Britain can take the fullest advantage and make the most of the freedoms and opportunities of keeping the pound?
The Prime Minister does not want to develop such a strategy. He wants people to believe that the decision is made, that entry is inevitable and that the decision of the British people is a formality. I believe that he will find that he is very much mistaken.

§ The Prime Minister
At least the right hon. Gentleman has made it clear that he is opposed to a single currency for good, for ever.

§ Mr. Hague
No, I have not.

§ The Prime Minister
No, he has not, he says. Well, he could have fooled me. We are to protect, are we, the thousand years of British history for the next Parliament but not the one after? This is the fourth position that the right hon. Gentleman has had on the issue since the election. In May 1997, he said that he was against the single currency in principle. Then he said that he was against the single currency in principle "for the foreseeable future". Then he said that he had always said that we intend to oppose it at the next election". That would mean for the next Parliament. Then he said: I don't think it's necessary to say we are against it in principle. Now he is saying that he is against it for the next Parliament, but not that he is against it for ever. If anyone wanted to know why he and his party are not taken seriously on this issue, they should have listened to him just now.
187 I shall deal with some of the points that the right hon. Gentleman made. The whole purpose of the national changeover plan is to make the preparations necessary to allow us to make a choice. If we do not make those preparations, we will not be in a position to make the choice. As he has just told me that he does not rule out joining, he would be in the same position but at a later stage. It is important to try to do what is right for this country's interests. The right hon. Gentleman says that we are going to push people into it, but we have made it clear that there will be a referendum and people will have the ultimate choice. However, to allow them to be in the position to make that choice, especially with the euro now a reality, it is important that we make those preparations.
I believe that the expenditure is right, in order to prepare us for the euro. The Chancellor pointed out to me that the expenditure will be somewhat less than the amount the Conservative Government lost in their exit from the exchange rate mechanism. However, we do not want to bring back those memories.
The truth of the matter is that the Conservatives said that it would not happen. They were wrong. They said that if it did happen, it would collapse. They were wrong. Now they say that, whatever the circumstances, our motto should be "be not prepared". Wrong again. They have been wrong on every major issue connected with this policy every time that they have opened their mouths. The ostrich strategy will simply not work.
Does the right hon. Gentleman understand that he is the first Tory leader in living memory to put himself on the opposite side from the CBI, the BBA, the British Chambers of Commerce and the City of London? We could even have the delicious irony of going into the next general election with the only fears on the financial markets being the prospect of a Tory election victory. That, I am afraid, is his contribution to the Conservative party, and he will rue the day he made it.

§ Mr. Paddy Ashdown (Yeovil)
There is a rule of thumb about Government statements in the House, which is that the longer the statement, the more opaque the policy. That is a bit of what we heard earlier. I am reminded of a comment from a Minister earlier today when he was asked whether entry was a matter of when or if. He said that the Government's policy was that the two words are now interchangeable. I do not know precisely what that means.
The statement was very significant. Is not the truth simply that today the Government have crossed the Rubicon in favour of the euro? I greatly welcome that, even though the Government have crossed the Rubicon only by the tiniest millimetre. I welcome it even though the Government are trying to pretend that they have not crossed the Rubicon. I welcome it because now the Government will have to defend their position—something that they have not done before.
The statement has two levels: the level that one sees, and the level that one is supposed not to see. The level that one sees is the perfectly sensible statement about measures to be taken in preparation for the euro. We welcome those measures, which are sensible, realistic and practical. I am glad that they will be debated and voted on in the House.
188 The level of the statement that we are not supposed to see is the continuation of the Government's policy of leadership by stealth. They move forward a millimetre at a time, but sooner or later they arrive at a point from which they cannot go back. That point has been arrived at today.
I have a question for the Prime Minister. Today he has been attacked by the Tories, and tomorrow he will be attacked by the Tory, Euro-sceptic press. Does he then leave the position undefended, or does he leave it to others—such as the CBI and the other organisations that he has just mentioned—to defend it for him?
All those organisations have shown more leadership on the issue than the Government, but the Prime Minister cannot leave it to them. The Government will have to defend their position: they can follow a policy of stealth, but they cannot win a referendum by stealth. Unless the Government are prepared to come forward and argue the case for the euro, they risk this decision, the most important that Britain has to face, being lost by stealth. [HON. MEMBERS: "Hear, hear."] That response shows what that lot on the Conservative Benches want to happen. That is the policy that the Government are currently following.
Is it not a tragedy for Britain, as this country faces the most important decision that it will face in the next two or three decades, that the Government take the view that they want to join the euro but try to pretend that they do not, and that the Tories take the position that they want to get out of Europe but try to pretend that they do not?
I have a single, specific question for the Prime Minister, which will reveal his intentions. He has told us that he wishes there to be a referendum early in the next Parliament, which means that the necessary legislation must be passed in this Parliament. Does he understand that?

§ The Prime Minister
First, I will try to take that as a statement in support, but it is a little unfair to accuse me of acting by stealth. After all, I am all here, in the House of Commons, making the statement. As for the referendum, the position is as we have set it out.
I shall deal head on with the basic criticism made by the right hon. Gentleman. There are three positions with regard to the euro—"no, never", "yes, now" and "yes, on condition". That last position is where we are now, and it is the right position to be in. It allows us to signal our intention, to set out the proper conditions, and to say what is necessary for the euro to work for the British national interest.
I believe that that balanced, sensible course sets a direction for this country, but it makes it clear that joining the euro must be in the national economic interest and it sets out the conditions for that. I surmise that, if we were in different positions and I was asking the right hon. Gentleman questions, he would probably agree that these economic conditions have to be met. When he reflects on the matter, he is probably in the same position as we are.

§ Mr. Martin O'Neill (Ochil)
Does my right hon. Friend agree that it was fair of the Leader of the Opposition to say that the position was unnecessary, expensive and time-consuming, but that the right hon. Gentleman was referring to his own position? The Tory position is unnecessary because people want to join the euro; it is expensive because the longer we stay outside, 189 the greater will be the problem for business; and it is time-consuming because the House has no idea when the convergence criteria would be met to the satisfaction of the Conservative party. Is it not the Government alone who are prepared to take the necessary steps and put the choice to the people in a referendum?

§ The Prime Minister
My hon. Friend makes the sensible point that it is absurd of the Conservative party—if what we have heard today is their official position—to say that it will rule out the euro in principle, but only for 10 years. That is an absurd position: one either rules out the euro in principle, or one sets out the conditions necessary for entry.
My hon. Friend is also right to say that the position of the Conservative party is contrary to our national interest in the sense that, unless we make the expenditure and the preparations, we cannot be in position to exercise the choice. We are not forcing business to spend money, but saying what it would be sensible to do if they wish to be in a position to take advantage of the single currency, should Britain join it. I think that that common-sense position will appeal to the vast majority of people in business.

§ Mr. Kenneth Clarke (Rushcliffe)
The Prime Minister will recall that I have on occasion been extremely critical of his and his Government's weasel words on EMU, whether they were in articles in The Sun or in statements to the House. Will he therefore accept that I welcome the marked change of tone represented by today's statement? In particular, I welcome the fact that he has reached agreement with representatives of the majority of British business on the practical steps that need to be taken if we are to give reality to the policy of prepare and decide.
Will the Prime Minister undertake to continue from now on to put his mouth where he thinks our money ought to be? Will he confirm that, in the real world, the British people should be concentrating on whether the country has achieved genuine and sustainable convergence with the economies of the euro zone, whether his Government can succeed in negotiating satisfactory terms for entry, and what their decision will be in the referendum, whenever it may come?

§ The Prime Minister
I largely agree with the right hon. and learned Gentleman. This is a major debate about the future of our country, and I have set out the Government's position by making a statement to the House. I shall, of course, carry on stating why I believe our position to be in the national interest. The right hon. and learned Gentleman and I would share a view on one central point: to be pro-British, one does not need to be anti-European. We can be both, and, in a modern world, we should be.

§ Mr. Giles Radice (North Durham)
Does my right hon. Friend accept that his statement represents a major step forward? Not only did he set out practical preparations that the country must take, but he made it clear that, provided the economic circumstances are right, it is the Government's intention to join. This is the first time that the Government have said that so clearly. Does he agree that the time has come for a great national debate to inform the British people about the euro, and that the British Government must lead the debate?

§ The Prime Minister
Of course, my statement and its aftermath are part of the national debate. It is important 190 that we have set out the economic circumstances that would make joining in our national interest. We have set those circumstances out clearly and we have signalled the Government's direction. We have set out the conditions clearly, and that is the right position to take.

§ Sir Edward Heath (Old Bexley and Sidcup)
The Prime Minister has been absolutely right in everything that he has said today. I welcome that, although I would have welcomed it even more if he had said it last June when the whole process began.
We risk what we suffered before for 22 years when we had no influence whatever in the policies being followed by what is now the European Union. We cannot afford to take that risk again. I urge that preparations should be made as speedily as possible. We have heard many pseudo-arguments, all of them dominated by one economic fact throughout the history of the world. That fact is this: no single market in the world has more than one currency. We cannot carry on successfully in a single market if we go for multiple currencies. That simply is not feasible. The rest of Europe knows that perfectly well, and the United States knows it too. Where would the US be if it had had more than one currency? There is no argument against that point, and I hope that the Prime Minister will act as speedily as is practically possible.

§ The Prime Minister
It is important to realise that a single currency in a single market can bring benefits in terms of jobs and investment in industry. That is why we have set out our direction today. There must be settled and sustainable economic convergence, but the direction needed to be set out, and it has been.

§ Mr. Tony Benn (Chesterfield)
Will the Prime Minister make it clear when the information published by the Government is sent out that every elector will be told that, if Britain is a member of the single currency, he or she will lose the right to elect or to remove on polling day those who make the economic decisions that affect our lives? Will he also point out that, under the Maastricht treaty, he himself would be in breach of the law if he tried to influence the decisions of the central bank? Is he aware that democracy is held by many people, including me, to be a national interest? Is he also aware that, on this matter, there are divisions in all parties and there will be a free vote in the House? Will he give us an assurance that the Cabinet will have the same right to freedom that was made available in 1975 during the previous referendum campaign?

Hon. Members
Hear, hear!

§ The Prime Minister
It is interesting to hear what I sometimes call the Thatcher-Portillo-Benn axis. I understand why my right hon. Friend holds that view very strongly indeed, but he must understand that there are those of us who are equally in favour of people having their say, which is why we will have the referendum. We have pledged that the final decision will be that of the British people. Pooling our sovereignty in this way, if it is in the national economic interest, better for British jobs, investment and industry and enhances British influence and standing in the world, is the right thing for Britain to do. We should have the campaign on the basis that people on either side of the argument are honourably intentioned 191 but that we disagree, not about whether we should follow the national interest, but about what it is. I happen to believe that it remains in the course that we have set out today.

§ Sir Michael Spicer (West Worcestershire)
As part of the Prime Minister's changeover plan, has he turned his mind to the collapsing value of the euro? In forcing convergence and complying with the Maastricht treaty, is it his plan to shadow the euro downwards? If so, what will that mean for his inflation target?

§ The Prime Minister
That is not our policy. The hon. Gentleman and, I am afraid, the majority of Conservative Members want the euro to fail. That is all that they have left—[Interruption.] Literally, that is all that they have left to hope for: that the whole thing collapses. If the euro collapsed, even if we were out of it, it would be a disaster for this country. He and other Conservative Members should get into the real world today.

§ Mr. Robert Sheldon (Ashton-under-Lyne)
While I welcome this most important step in producing a changeover plan, is my right hon. Friend aware that whether we join the euro is the one crucial decision to be taken during the lifetime of this Government? Is he aware that the sooner we make that firm commitment to join, even without setting a date, the more seriously we will be taken by our partners in Europe and the more fully we will be able to participate in the crucial decisions that lie ahead?

§ The Prime Minister
The conditions are important too. As I said, this is an economic union and conditions relating to economic convergence and to the five tests that the Chancellor set out, including those relating to economic reform, are important for monetary union to work in this country's national interest. So the direction is clear, but those conditions have to remain in place and be satisfied because that also is in the national economic interest.

§ Mr. Michael Heseltine (Henley)
Would the Prime Minister recognise that this country, which has proudly defended its sovereignty for 1,000 years, has been told by every Conservative Prime Minister since the late Lord Stockton that we would enhance that sovereignty and our power and influence by drawing closer to Europe? Some of us still believe what we were told and followed the House of Commons whipping procedure at that time.
Will the Prime Minister recognise that his statement—which is a marked step forward in the intention of the Government to join a successful single currency—stripped of its party political rhetoric will be widely welcomed in areas of society way beyond his political party? With that in mind and given that the conditions entrenched in his statement have to be fulfilled before a successful application is made, will he recognise that that will be possible only if there is an all-party grouping to lead public opinion on the matter? Above all else, will he give the House a categorical assurance that he will lead that all-party alignment?

§ The Prime Minister
If I were a Conservative Member, I should reflect on what a former Deputy Prime 192 Minister and long-time member of the Conservative party has just said. I believe that the issue is one that should be dealt with across the parties and I certainly intend to be at the forefront of that campaign. I have never believed that this is a issue that can be dealt with by stealth, and I do believe that the economic conditions are important. The national economic interest must always be paramount, but I believe that that is satisfied by the course that we have set out today. I thank the right hon. Gentleman for his support.

§ Mr. Bill Rammell (Harlow)
I warmly welcome my right hon. Friend's statement. Does he agree that, if we follow the advice of the Conservative party and stay out of the single currency for 10 years, not only shall we be repeating the mistakes of British history for the past 50 years, but it would represent an abdication of political leadership? Does he also agree that, if we believe that a strong single currency is in Britain's interests, striving to meet the five economic criteria set by the Chancellor should be an explicit aim of Government policy?

§ The Prime Minister
The Chancellor has already made it clear that we want to meet those tests. My hon. Friend is right about the 10 years: the two justifiable positions are to rule out joining a single currency for ever, as a matter of principle, or to set out the economic tests necessary to make joining in the national interest. The Leader of the Opposition must recognise that it is genuinely absurd to rule out joining for 10 years, for that would mean that we had absolutely no influence on decision making, but we would still have to do all the things later that we are setting out today. It is far better to make the test our national conditions and do our best to meet them.

§ Sir Archie Hamilton (Epsom and Ewell)
For once, I find myself agreeing with the Prime Minister: it cannot be right for us to join the euro until we have seen convergence in the economic cycles of our economy and that of the Europeans, nor can it be right to join until we have seen the liberalisation of labour and capital markets on the continent. That will take years—so why does the Prime Minister not join my right hon. Friend the Leader of the Opposition in a policy that rules out joining for this Parliament and the next?

§ The Prime Minister
Because I do not believe that would be sensible or in the country's interests. The right hon. Gentleman is right to say that convergence and economic reform are important, but we shall achieve them far better if we set out a clear direction for the country, which is what we have done today. The purpose of the national changeover plan is to put us in the position of making preparations so that we can make a choice. If we do not do that now, we will be in the position of being able to make no choice at all, and I cannot believe that that is right for this country.

§ Mr. Dennis Skinner (Bolsover)
Does the Prime Minister agree that, on any objective account, the Common Market-European Union has not been a rip-roaring success? The common agricultural policy, as he knows and agrees, has been a total failure; the common fisheries policy is not worth a hatful of crabs; and there are 18 million people out of work in the Common 193 Market—and no signs of improvement. When we take all that into account, as well as the fact that, in seven short weeks, the euro has fallen by 7 per cent. against the dollar and 4.8 per cent. against the pound, all I have to say to my right hon. Friend—I am sure that he will take it on board—is that he should beware of those carrying out experiments in genetically modified currencies.

§ The Prime Minister
I think that the balance sheet shows that, overall, the European Union has been immensely positive for Europe and Britain's membership of the European Union has been positive or Britain. Of course we believe that the common agricultural policy needs reform, which is precisely why we are trying to make that reform happen, and of course we also believe that levels of unemployment in Europe are far too high. However, I do not believe that either the single market or the single currency has caused those problems. I think that long-term structural reform is necessary and that we should be part of that process to make sure that we put those people in Europe back to work.
One can criticise the European Union. However, if people take a step back and consider the history of Europe since the second world war, most would say that the European Union has been a success overall.

§ Mr. Archie Norman (Tunbridge Wells)
Given that the Prime Minister has today reaffirmed his intention to hold a referendum on this subject, does he agree with Lord Neill, who said that the Government who conduct a referendum of this kind should not distribute at public expense literature—even purportedly factual literature—outlining or otherwise promoting their case?

§ The Prime Minister
As we said, we shall respond in due course to Lord Neill's recommendations. Of course the rules should be fair for both sides, and we shall ensure that they are. When we respond to Lord Neill's recommendations, we shall publish that response in full so that hon. Members may see it.

§ Mr. Stuart Bell (Middlesbrough)
The entire House must welcome a statement that takes us towards completing the single market under the terms of the Single European Act, which was passed under the previous Administration. That Tory Government committed us to economic and monetary union.
The Prime Minister said that a Minister from each Department would be enlisted immediately to sell the benefits of the proposal and supervise the single currency changeover. Will he give the House a commitment that those Ministers will be enlisted, with the foot soldiers of the European movement—those who support the single currency--from now until the general election?

§ The Prime Minister
The purpose is to ensure that the Government are geared up properly for the necessary preparations. My hon. Friend makes a worthwhile point by mentioning the progress that we have already made in the European Union. The Single European Act, which was agreed by the previous Government, was a substantial act of integration, involving qualified majority voting on a scale not seen hitherto and breaking down a series of barriers and securing standardisation across many areas within the European Union. It is important to view this move as part of development in Europe.
194 All the way through, we have set out clearly the direction that we believe is right for the country and the economic conditions necessary to make EU membership in this country's interests. That balance between the direction and the conditions necessary to make that direction viable and sustainable for this country is precisely right.

§ Mr. Ian Taylor (Esher and Walton)
The Prime Minister has acted in what I believe to be the national interest by engaging first gear and moving towards preparing to join the euro. Anyone who opposes a national changeover plan must not want to have a referendum, because it can be held only if the British people are prepared. Anyone who thinks that British industry should not prepare does not understand the challenges that it faces: all businesses, whether small or large, are part of a supply chain.
Will the Prime Minister recall the words of the chief economist at ICI who said that it would not damage investment in the United Kingdom if we did not join immediately, but any signal that we would be out for a protracted time could be extremely dangerous for this country's economy and investment? I hope that the Prime Minister continues to change up gears as he moves towards the referendum.

§ The Prime Minister
There is no doubt that, if we were to follow a course of hostility to the whole concept, it would damage this country's influence and the prospects for investment in the United Kingdom.

§ Mr. John Bercow (Buckingham)
What is the right hon. Gentleman's empirical evidence?

§ The Prime Minister
The hon. Gentleman asks what the evidence is. If he were to talk to most people around the world who invest in this country, he would learn that they recognise that it is important for Britain to be part of the European Union and to be positive about the single market and the single currency.
The hon. Member for Esher and Walton (Mr. Taylor) is absolutely right: there can be no referendum without a national changeover plan. If we do not start the preparations now, we will not be able to join—even if we wish to do so. The Conservative party's official position today is that, even if joining is manifestly in the country's interest—even if it is plainly in the interests of industry, jobs and investment and even if business and industry are clamouring for us to join—we cannot be in a practical position to join. That is not a sensible position for a party that used to be able to speak for a section of business.

§ Mr. Denzil Davies (Llanelli)
Does my right hon. Friend recognise the irony that when a British Minister of Agriculture is, for the umpteenth time, in Brussels trying to negotiate radical reform of one common European policy—the common agricultural policy—he, as Prime Minister, is announcing to the House a plan to join another common policy, a common monetary policy? The damaging effect of that would be far greater than any effect that the wretched CAP could have.

§ The Prime Minister
I do not agree. I have set out the tests and economic conditions that have to be met for the common monetary policy. As I said, our position involves, first, seeing whether there is a period of sustained convergence; secondly, finding out whether the European Central Bank settles down, and, thirdly, dealing with the issues arising out of the Chancellor's five economic tests for flexibility and economic reform in Europe. We are perfectly placed. We can set out a direction for the country, set out the conditions and, as a result of the changeover plan, take advantage of the fact that we have made active preparations.

§ Sir Peter Tapsell (Louth and Horncastle)
Will the Prime Minister appreciate, leaving aside the vital constitutional issues, that most serious economists would tell him that it will be impossible to say whether or not the five economic tests have been satisfactorily met until the completion of at least two economic cycles, which makes nonsense of the timetable that he is putting before the country?

§ The Prime Minister
We do consult industry widely. I have set out the position of the Confederation of British Industry, the British Chambers of Commerce and the British Bankers Association, and most people in the City of London disagree with the hon. Gentleman. It is not correct to say that we are not listening to business and industry; we are doing so.

§ Mr. John Home Robertson (East Lothian)
This statement is all the more welcome because it has been made regardless of the ravings of unelected, offshore press barons. The Leader of the Opposition talked about costs. Since the cost to the British economy of exchanges with European currencies in recent years has been equivalent to our contribution to the European budget, I suggest that the sooner we join the European single currency, the better.

§ The Prime Minister
The extraordinary thing about the Opposition's position is that they are opposed not only to the single currency, but to preparations. The right hon. Member for -Richmond, Yorks (Mr. Hague) could have said that the time scale should be different, but he said that we should not even prepare and put ourselves in the position of being able to make a choice. That is plainly wrong. Without repeating to my hon. Friend what I have already said, I think it important that the conditions be met because they will make the satisfaction of our national economic interests the paramount consideration.

§ Mr. Howard Flight (Arundel and South Downs)
In his statement, the Prime Minister hedged his election commitment on the timing of the referendum and said that it would occur after the next election, except in unforeseen circumstances. Will he be gracious enough to tell the House what circumstances he envisages might lead to an earlier referendum?

§ The Prime Minister
If they were foreseeable, they would not be unforeseen. In referring to unforeseen circumstances, I was repeating precisely the words that the Chancellor used in his statement of 27 October.

§ Dr. Stephen Ladyman (South Thanet)
Does my right hon. Friend accept that, as he consults business about his plans, the only criticism that he will hear is that preparation should be faster and it is essential that he picks up a gear? If he speaks to executives in Marks and Spencer, as I have done, he will hear that they have already gone a long way towards preparation. [Interruption.] If he speaks to people who are running small and medium enterprises, he will be told that if a Government ever came to power wedded to the sort of Europhobia that we have heard from the Leader of Opposition today, that Government would put an end to their businesses. Will he give them the assurance that they want—that what the Government should provide is leadership and help with their preparations, and that what the country needs is a clear, fact-based debate so that we can all be of one mind when we go into the euro?

§ The Prime Minister
That is exactly right. We are of course undertaking the preparations in consultation with business and industry, which again is why it is so bizarre that we are told by the Opposition that we should not even make those preparations. I would point out to those Opposition Members who now even shout at the idea of Marks and Spencer that, when the euro notes and coins come in, a lot of British companies—some of them—will be accepting them. Therefore it is sensible, surely, to make preparations.

§ Mr. John D. Taylor (Strangford)
As one who identifies with Europe with ease and served in the European Parliament for 10 years, I have absolutely no doubt in my mind that the euro is driven more by politics than by economics. The promoters of the euro are people who believe in a united states of Europe—a Europe of the regions—and the diminution of the nation state. I am sorry to say it, but I think that the Prime Minister's statement could be the beginning of the end of the United Kingdom. However, he was honest when, in his statement, he said, I do not dismiss the constitutional … issues they are real, and he was right when he said that. Has he drawn those real constitutional issues to the attention of the palace?

§ The Prime Minister
The position that the right hon. Gentleman outlines is the "no, never" position. It is a position that says we never, ever go in. I totally understand that position, but I personally believe that, if it is in the national economic interest, we should go in. I put my statement in the way that I did, not to dismiss the constitutional issue, but simply to say that, in the end, the only question is, "Is it an absolute barrier to joining?" and my answer to that is no; if it is in the interests of British jobs, British business, British investment, we should do so. I think that that is correct; and the answer to the last part of the right hon. Gentleman's question is no.