Euro (Hansard, 29 March 2001)

§ 1. Sir Teddy Taylor (Rochford and Southend, East)
If he will make a statement on the impact on the UK economy of the level of the single European currency [154596]

§ 11. Mr. Owen Paterson (North Shropshire)
If he will make a statement on the means by which he will evaluate compliance with his five economic tests for joining the euro. [154606]

§ 12. Mr. David Taylor (North-West Leicestershire)
What assessment he has made of the impact of the UK's adoption of the euro on the prospects for the competitiveness of UK manufacturing industry. [154607]

§ The Chancellor of the Exchequer (Mr. Gordon Brown)
Despite the euro-sterling exchange rate, exports to Europe have increased by 5.2 per cent. in the past year. Overall, manufacturing exports have increased by 12.6 per cent. as manufacturing productivity has risen by 5 per cent. Our position on the five economic tests for the euro remains unchanged since the 1997 statement to the House. So that British business is prepared for the introduction of euro notes and coins in 2002, I am today in consultation with business, authorising an enhanced small business information campaign. which includes an updated website, and bringing Treasury expenditure on business preparations for this Parliament up to £9 million, thus helping British business to compete effectively in the single market, whether we are in or out of the euro. I hope that there will be all-party support for this extra help for business preparation. Total spending on preparation across government in this Parliament is around £24 million.

§ Sir Teddy Taylor
As the Government have been involved in direct intervention to prop up the euro and the 1088 Chancellor has instructed the Bank of England that 30 per cent. of the proceeds of its gold sales must be invested in euros, and as the Bank of England is now issuing substantial eurobonds, will the right hon. Gentleman give us some indication of the size of the mountain of euros now in our reserves? Does he think that that will be a good investment? Finally, in the light of what he said about the exchange rate mechanism, will he comment on the resolution passed at the Amsterdam summit, which states that member states with a derogation can be expected to join the exchange rate mechanism before membership?

§ Mr. Brown
First, we have no intention of rejoining the ERM. Secondly, on the question of the sales of gold, I draw the hon. Gentleman's attention to the National Audit Office report, which answers all his points and criticisms. Thirdly, on euro preparations—in other words, preparations for British firms to deal with the advent of notes and coins in 2002—I should have thought that the Conservative party would want to join business in making proper preparations. Am I to believe, however, that the whole Conservative party is not only against the euro in principle, but against assisting British business when it asks us for help in preparing for the advent of euro notes and coins?

§ Mr. Paterson
What are today's figures for the five economic tests?

§ Mr. Brown
The assessment of the five economic tests was made in 1997.

§ Mr. Paterson
Today's figures.

§ Mr. Brown
The assessment was made in 1997. We have said that we will make an assessment early in the next Parliament. We have said also that we will not provide a running commentary on the issue. The hon. Gentleman has a question that he must answer. He is opposed to any assessment and to considering the issue because his party has ruled out the single currency as a matter of dogma.

§ Mr. David Taylor
A decade ago, the disastrous Tory currency experiment with the ERM bankrupted 100,000 firms and doubled unemployment. What does my right hon. Friend say to those who believe that sustainable British convergence with the euroland economies is a chimera? Will he confirm that a one-size-fits-all interest rate policy would assuredly bring about the boom and bust that he has so successfully banished?

§ Mr. Brown
My hon. Friend knows that it is precisely to deal with the questions that have been asked about the effect on employment, investment, financial services and the flexibility of the economy, and about the durability of convergence, that we have set the five economic tests. It is precisely to answer those questions that we will make an assessment of the five economic tests in the next Parliament. I have already said that we have no intention of repeating the Conservative experiment with the exchange rate mechanism, for which the Conservative party must accept full responsibility as it formed the previous Government. At the same time, given that we 1089 announced measures that will help business to prepare for the advent of euro notes and coins, it is now for the Conservative party to tell us whether it will move against business by refusing to support even those measures.

§ Mr. Barry Sheerman (Huddersfield)
Does my right hon. Friend agree that one of the strangest features of the current Parliament is the official Opposition's refusal to join the cross-party group on the euro, which I chair? The group meets regularly, monitors preparations and checks that no money is spent on promoting the euro. What sort of Opposition is it who bury their heads in the sand and refuse to take the empty chair in the preparations group of this House?

§ Mr. Brown
Mr. Speaker will know that we invited every political party in the House of Commons to join the group that would consider preparations for the euro. Every political party—including the Liberals, the nationalist parties and the Irish parties—accepted, except one: the Conservative party. It is hardly surprising that the deputy director general of the Confederation of British Industry said: The Tory party's more Euro-sceptic view is not one that most CBI members would feel comfortable with. It's not in our commercial interests to have a Euro-sceptic government. Most businesses would take their hat off to the Government for getting Britain's message across better and for building alliances across Europe. The Conservative party is not only anti-Europe, but anti-business.

§ Mr. Matthew Taylor (Truro and St. Austell)
The Chancellor seems to have forgotten some facts: since 1997, a third of a million jobs have been lost in manufacturing and 60,000 jobs have been lost in farming. The CBI and the National Farmers Union agree that much of the blame for that lies with the current overvaluation of the pound, and with Britain losing its share of international investment and trade and experiencing a rapidly increasing deficit. Yet the Chancellor does not include the exchange rate in his conditions for entry. Liberal Democrats say that on top of his conditions, there must be a more competitive exchange rate—

§ Mr. Speaker
Order. I call the Chancellor.

§ Mr. Brown
Some people would never join the euro because of dogma; others would join without considering the tests that we have set out. We will make a proper assessment of the tests. When I listened to the hon. Gentleman's description of the economy, I thought that he was referring to what happened in the Conservative years. Manufacturing productivity and output have increased; there are 1 million more jobs; and interest rates that were 15 per cent. under the Conservatives are now half that rate, with mortgages £1,200 a year lower. It is not surprising that business perceives the Conservative party as not only anti Europe but anti-business.

§ Mr. Robert Sheldon (Ashton-under-Lyne)
While I welcome my right hon. Friend's assistance to British business and support our entry into the eurozone, will he 1090 consider that, besides the fives tests that he has set out, there is a possible sixth test: entry into the eurozone at a competitive rate? What are his views on that?

§ Mr. Brown
We have set five economic tests, which will be applied. We will assess them and report the results to Parliament. If Parliament so decided, there would be a referendum whereby the British people could make their assessment. We are not in the business of speculating about the exchange rate.

§ Mr. Michael Portillo (Kensington and Chelsea)
Will the Chancellor give a straight answer to a question that is on many people's minds? The Government will not want the euro to be an issue at the general election because they know that the moderate majority of people are opposed to their determination to scrap the pound. If the Chancellor continues to refuse to debate the issue between now and the general election, despite the fact that it is the most important question that confronts this country, will he promise that a Labour Government will put a fair and straightforward question in a referendum? What will that question be?

§ Mr. Brown
Of course we shall put a fair question.[Interruption.]The problem with Conservative Members asking about a referendum is that they totally oppose it—

§ Mr. John Bercow (Buckingham)
Con man!

§ Mr. Speaker
Order. I heard the hon. Member for Buckingham (Mr. Bercow) make an unparliamentary remark. Will he withdraw it?

§ Mr. Bercow
Of course, Mr. Speaker. I withdraw it immediately.

§ Mr. Brown
The Conservative party asking a question about a referendum does not make sense to the British people. The shadow Chancellor said that a single currency would mean giving up government of the United Kingdom and that no British Government could do that. He is therefore against the single currency for reason of dogma. He would never accept a referendum or its result. He is against it on the ground not of economic interest but of ideology. I challenge him to confirm his statement.

§ Mr. Portillo
I think that people will draw their own conclusions from the Chancellor's refusal to state what the question in a referendum would be. It is clear that the Labour party would not give people a fair and straightforward opportunity to vote on whether to scrap the pound.
Will the Chancellor answer a second question? As the Government will not want to discuss the euro during the general election campaign, I presume that they will argue that people will have a chance in a referendum to have a fair say on the matter. Will the right hon. Gentleman confirm that the Government have rigged the financing of the referendum so that the parties that wish to scrap the pound will be allowed to spend twice as much as the Conservative party will be allowed to spend on defending the currency? 1091 Will the Chancellor now repeat in this House what the Government said in the House of Lords—that they made no pretence of creating a level playing field?

§ Mr. Brown
Following those remarks, I am happy for the general election campaign, whenever it comes, to be fought with a considerable amount of debate on the issue of the euro. The Conservative party has shown today not only that it is against the single currency as a matter of dogma, and not only that it is against any assessment of it while expecting us to call a referendum, but that it will not even support our business preparations to enable British businesses in or out of the euro to deal with the question of trading in the single currency area.
I ask the shadow Chancellor this: does he now support our preparations to help British businesses cope with the euro, will he say that he is against dealing with the European issue as a matter of complete dogma?

§ Mr. Portillo
I believe that many people will conclude that the Chancellor is behaving disgracefully in not even attempting to answer the perfectly fair and perfectly serious questions that I have put to him. I cannot understand why he refuses to debate the real issues. I cannot understand why a man like he Chancellor has so little intellectual pride that he is willing, if he possibly can, to hoodwink the British people into giving up their own currency.
Does the Chancellor agree that the position is as follows? His five so-called tests are entirely bogus. If Labour were to win the election, there would be no consideration of the constitutional and political issues. There would be no protection against an ill-judged decision from the so-called tests, because they are purely subjective and purely a matter of opinion.
Will the Chancellor confirm that if there were a referendum, the question would be slanted and tendentious, and the funding would be rigged? Does not that itself merely confirm that those in this country—the vast majority: the moderate majority—who want to keep the pound will have to vote Conservative at the general election?

§ Mr. Brown
I am even more happy to continue this debate on the issue of the euro, because ours is a reasonable position that we are presenting to the British people. First, we do not rule out the euro on the basis of issues of dogma. Secondly, we will conduct a series of tests—the five economic assessments—and we will report to the British people within two years of a general election and the start of a new Parliament. Thirdly, the tests will be applied rigorously, in such a way that people can see the effect on employment, investment, flexibility and financial services. What we will not do is rule out the euro on ground of dogma or of ideology.
We will take no lectures from the shadow Chancellor, who was in the Treasury during the period when Britain faced an ignominious exit from the exchange rate mechanism, and who was responsible for 15 per cent. interest rates, 22 tax rises and the biggest borrowing requirement. When it comes to what the British people will believe about the economy, we should bear in mind that even the shadow Chancellor has said that the Conservatives must be apologetic to the British people about the way in which they mismanaged the economy.

§ Mr. Denzil Davies (Llanelli)
My right hon. Friend will know that in the last few days the euro has again begun to slide in value against the dollar to levels that it reached last autumn, when the G7 central bankers had to intervene to prop it up. Can he tell us whether the G7 bankers have any plans to do that again?

§ Mr. Brown
My right hon. Friend was a Minister in the Treasury—[HON. MEMBERS: "When?"] He was a Treasury Minister in the 1970s, and he knows perfectly well that no Treasury Minister answers questions about speculation on such issues. What we do, as the G7 Ministers said in their statement at Palermo, is to continue to review these matters.
What I will tell my right hon. Friend is that the European economy is growing by some 2.5 to 3 per cent. this year. That is a higher growth rate than that of the American economy. We expect the British economy to grow by between 2¼ and 2¾ per cent. In other words, there is growth in investment taking place in the European area. Employment is rising both in Europe and, of course, in the British economy itself. My right hon. Friend's prognostications about the European economy being in such a parlous state are not ones that he would want to follow up with detail.