Economic and Monetary Union (Hansard, 24 June 1999)

§ 1. Mr. Nick St. Aubyn (Guildford)
What discussions he has had with the Governor of the Bank of England on the employment consequences of EMU; and if he will make a statement. [87056]

§ The Chancellor of the Exchequer (Mr. Gordon Brown)
The Governor and I talk regularly about economic issues. As a result of the Government's October 1997 statement on their position on EMU, the Governor and I also sit on the standing committee on euro preparations. There is also a parliamentary committee on EMU preparations, which all parties have been asked to join. Our decisions on EMU will be made in the national economic interest.

§ Mr. St. Aubyn
In February, the Prime Minister told us to prepare to join the euro. This, week the right hon. Gentleman told us that the economic conditions are not right; the Secretary of State for Trade and Industry told us that the economic conditions are not right; and the Governor of the Bank of England, in published evidence, told us that the conditions may never be right. Why should British business have to spend billions of pounds preparing for the euro when the Prime Minister is not prepared even to promote it?

§ Mr. Brown
It is British business that is saying that the decision on EMU should be made in the national economic interest. It is the Conservative party that is saying that, such is its ideological objection to EMU, that, even if the national economic interest suggested joining, it would not join. If the hon. Gentleman would care to look at the views that have been expressed by business men within and outside the CBI, he will see that they make it absolutely clear that they have no support for the Conservative position on EMU.
As for who is best at advancing the national economic interest, perhaps the hon. Gentleman will look back on the letter that he wrote to The Daily Telegraph on Tuesday in which he made clear his views on EMU, but also, interestingly, commented on the economy. Did he say that there was a recession, or that there was stagnation? 1268 No. His words were words of congratulation. He talked about this year's "resurgence of the economy." At every Question Time between now and the general election, we shall remind him of his congratulations to the Government.

§ Mr. Bill Rammell (Harlow)
Independent economic estimates have suggested that a successful single currency could add 0.5 per cent. to Britain's GNP, significantly boosting employment prospects. If that is the case, and if the criteria for entry are met, does the Chancellor agree that it is essential that that issue is put to the people in a referendum, and that it would be wholly wrong, simply in the interests of one political party, to refuse to put that question to the people for an arbitrary period of 10 years?

§ Mr. Brown
I am grateful to my hon. Friend, who points out a fundamental flaw in the Opposition's policy. Some Opposition Members say that they would not join a single currency for 10 years; others say—I think that the shadow Chancellor is one of them—that they would never join. I welcome two new Members to the Opposition Front Bench. One, I understand, is totally against the single currency; the other is totally for the single currency.

§ Mr. Kenneth Clarke (Rushcliffe)
Does the Chancellor agree with the Monetary Policy Committee of the Bank of England that the excessive strength of sterling against the euro is now causing a risk of deflation and of our falling far too far below the inflation target, and that it may need to be corrected? Does he further agree that the lasting misalignment of sterling with the euro and the currencies that preceded it is now giving us the worst trade deficit with our European markets that we have had for eight years, causing great damage to our manufacturing and exporting industries? Will the right hon. Gentleman encourage the MPC to continue to incline towards reducing interest rates in order to bring floating sterling back to a more sensible relationship with the euro?

§ Mr. Brown
I am grateful that the economic debate on the Conservative Benches is being entered into on the matter of economics, not simply politics. I welcome the former Chancellor to our proceedings, although he will again be surprised to see the strength with which Conservative Front-Bench spokesmen are against the position that he holds on EMU. I hope that he, too, will come to the view that it is a good thing that we made the Bank of England independent, and I hope that he will try to persuade his colleagues that the Conservative Front-Bench position of being completely against the independence of the Bank of England threatens a return to stop-go in the economy. The strength with which the Conservatives have opposed the independence of the Bank of England makes it almost impossible for them, with any integrity, to change their position between now and the general election. With regard to the exchange rate, as the former Chancellor will know, 80 per cent. of the rise in the exchange rate took place under him.

§ Mr. Geraint Davies (Croydon, Central)
Given the resurgence of our economy about which we have already heard—and, therefore, the strength of sterling versus the euro—will my right hon. Friend support Chancellor 1269 Gerhard Schröder in his changes in tax and expenditure to make the German economy more competitive in order to encourage exports into Germany and to boost the strength of the euro, so that, alongside the resurgence in demand from the far east and more trade to the United States, we see balanced growth across Europe?

§ Mr. Brown
I am grateful to my hon. Friend for pointing out the importance of the rest of Europe: 50 per cent. of our trade is with the rest of Europe, and 3 million jobs depend on it. A Conservative party that would threaten to detach us from Europe would put at risk British industry, British manufacturing and British jobs.
On the agenda for reform in Europe, my hon. Friend will know well that it is the British Government who are pushing not just for the reform of labour markets and employment policy, with our employment action plans, but for the reform of capital markets and product markets to make the single market work more effectively for British business and British jobs.

§ Mr. Malcolm Bruce (Gordon)
Does the Chancellor accept that there is a real threat to British jobs from the current high exchange rate, high real interest rates and uncertainty over the Government's intention on the single currency, borne out by the comments of the Prime Minister and the Secretary of State for Trade and Industry—made, interestingly enough, abroad rather than in this country? Is it not time that the Government, led by the Prime Minister, made a clear declaration of intent to join the single currency and set out a timetable of measures to achieve convergence and to secure the winning of a referendum?

§ Mr. Brown
There are two positions in this debate that we do not support—the first is to rule out joining the single currency whether it is in the national economic interest or not, and the other is to join the single currency now, even when it is clear that, at this stage, the convergence tests have not been met. I know that the hon. Gentleman is one of the six candidates for the leadership of the Liberal Democrats, but he does not need to make outrageous statements to put forward his case.

§ Mr. Barry Sheerman (Huddersfield)
Is my right hon. Friend aware that the Committee on euro preparations—which my right hon. Friend established under my chairmanship—met this morning, and that, yet again, we had an empty chair not filled by any member from the Conservative party? If the Conservatives are serious about scrutiny—as is suggested by the original question from the hon. Member for Guildford (Mr. St. Aubyn)—would it not be a good idea for them to become members of that committee, so that they could help us to scrutinise properly?

§ Mr. Brown
I am grateful to my hon. Friend, whose chairmanship of the committee is much valued, and I am grateful that all other parties have joined the committee. I suspect that the reason why the Conservative party cannot join the Committee is that it cannot decide whether to put on it the Front-Bench spokesman who supports the single currency or the Front-Bench spokesman who opposes the single currency.

§ Mr. Francis Maude (Horsham)
In the light of the confusion that is being sown deliberately, will the 1270 Chancellor today confirm that the Government's policy remains the same, and that the Government are, in his own words, committed in principle to economic and monetary union"? Does he agree with the Chancellor of the Duchy of Lancaster, who said that it would be "extraordinary" if a Labour Government were not to hold a referendum on this issue with a view to scrapping the pound soon after the next election?

§ Mr. Brown
The confusion is on the Conservative Front Bench, where there is someone supporting the single currency and someone opposing it. [Interruption.] Conservative Members are getting very upset about this. The hon. Member for Grantham and Stamford (Mr. Davies), one of those trying to make sedentary interventions, says about the policy of opting out of joining a single currency: It would be completely crazy and contrary to the national interest to throw away our option to join the single currency. Not only is the Conservative party divided between the Back Benches and the Front Benches, it is divided within the Treasury team. The Government's position is the October 1997 statement—that is what we are pursuing.

§ Mr. Maude
I am grateful to the Chancellor for highlighting the sense of our policy. The Government have continued to refuse to abandon the national changeover plan, despite nobody having voted for it. It is a bit like starting to build a house without applying for planning permission. Given that the Chancellor is committing hundreds of millions of pounds of taxpayers' money—and that he is asking businesses to commit hundreds of millions of pounds of their money—to a decision that even the Prime Minister admits hardly anyone supports, will the Chancellor be on the platform on 9 July with the other leaders of the scrap the pound campaign at its 15th relaunch? Or is he, like the Prime Minister, so gutless that he expects others to do his dirty work for him? Why can he not summon up the courage to stand up for what he believes in?

§ Mr. Brown
First, there is no organisation called "the scrap the pound campaign". Secondly, the position on the single currency is unchanged. As for trying to push through the national changeover plan, and costs within it, without parliamentary discussion, it was discussed last week in the Committee considering the Finance Bill and it will be discussed on the Floor of the House. Any expenditures will be with parliamentary approval, so the right hon. Gentleman had that completely wrong.
I suggest that the right hon. Gentleman goes back to the drawing board, and has a meeting of his Treasury team, He should ask the hon. Member for Grantham and Stamford whether he still agrees with this statement: Taking irrevocable decisions before you have to and before the essential facts are available is bizarre and indefensible. Tory Front Benchers believe not only that their policy is crazy and contrary to the national interest but that it is "bizarre and indefensible". I hope that they will do some preparations before the next Treasury Question Time.

§ Mr. Derek Twigg (Halton)
Is it not important to listen to the views of business on employment? ICI, which employs more than 4,000 people in my constituency, has clear views on the euro and the single currency.
1271 Speaking of the bizarre, the hon. Member for Guildford (Mr. St. Aubyn) suggested in the Finance Bill Committee that there was a similar argument for retaining the euro option as for retaining the nuclear deterrent. Is that not bizarre?

§ Mr. Brown
As I understand it, the hon. Member for Guildford (Mr. St. Aubyn) said: Even if we change the Maastricht treaty and disengage in the next Parliament, it will be possible for a Government in 50 or 100 years to renegotiate."—[Official Report, Standing Committee B, 17 June 1999; c. 674.] The Conservatives' position is becoming more difficult to understand by the minute. I take it that their extremism is now such that they would not join a single currency even if it were in the national economic interest; they would oppose making preparations, as my hon. Friend the Member for Huddersfield (Mr. Sheerman) said, even though the CBI, the British Bankers' Association and British Chambers of Commerce are all sitting on our preparations committee, along with every political party other than the Conservative party; they would opt out of European legislation; and they would renegotiate the treaties of membership. That is a manifesto not for leaving Europe or the euro but for leaving their senses.