HC Deb 27 March 2003 vol 402 cc442-4
8. Mr. Mark Todd (South Derbyshire)

What assessment he has made of potential measures to improve the flexibility of the economies of the European Union. [105157]

The Chancellor of the Exchequer (Mr. Gordon Brown)

I attended the European economic reform summit last Friday. European Union Finance Ministers agreed a joint statement on measures to improve the flexibility of the European economy, in particular the European patent, a review of labour market flexibility and a reform plan for research and development across Europe. The Government's own report on economic reform in Europe shows the additional reforms that still require to be made.

Mr. Todd

I thank my right hon. Friend for that answer, and for the robustness of that approach and of his past statements on the importance of increasing the flexibility of European economies before we consider joining the eurozone, which we all wish to do at some point when that is appropriate.

Mr. Brown

It is absolutely important, for both the British economy and the rest of the European economy to grow, that we make changes to reform the labour markets, capital markets and product markets in Europe. The fact of the matter is that whereas a few months ago the European Union was predicting that the euro area would grow by over 2 per cent. this year, it is now likely to grow by less than 1 per cent. It is also true that the euro area economy has grown by more than 3 per cent. in only one of the last 10 years, compared with seven of the last 10 years in the case of America. That is what demonstrates the urgency of these economic reforms for economic prosperity.

There is an understanding that greater labour market changes must be brought in. Some people will have seen the announcements by Chancellor Schröder in Germany over the last few days. European unemployment is more than 15 million. That is unacceptable and the reforms are essential to tackle it.

Mr. Henry Bellingham (North-West Norfolk)

What assessment has the Chancellor made of the effect of the agency workers directive? Is he aware that the CBI has predicted that it may well cost 50,000 jobs? Why did Labour MEPs vote for it? Surely he will not get the flexibility back into those labour markets until we once again opt out of the social chapter.

Mr. Brown

The hon. Gentleman is absolutely right that we are in negotiations over the future of the agency workers directive, and we will be doing what we can to protect the British position in this matter. However, the hon. Gentleman should really read the words of the shadow Chancellor when he talks about labour market flexibility. He said: Our labour market is … more flexible than that in other EU countries and that in almost every case, the UK is the most liberal in the EU itself.

Mr. Kelvin Hopkins (Luton, North)

My right hon. Friend will be aware that Germany is in serious economic difficulties and I am sure that if he were the German Finance Minister he would want to have some flexibility on interest rates, on fiscal policy and on the exchange rate, all of which are, of course, impossible to change. Will my right hon. Friend accept my congratulations for steering us clear of the greatest inflexibility of all: membership of the eurozone?

Mr. Brown

My hon. Friend is alluding to a question that is lower down the Order Paper, dealing with the assessment of the five tests on the euro. I can tell him that we are on course to complete the assessment of the five tests by June.

Mr. Michael Howard (Folkestone and Hythe)

Of course it is true that this country's economy remains the most flexible in Europe, but does not the Chancellor realise that he is doing his best to destroy that? Does he not realise what a ridiculous figure he cuts when he lectures our European partners on the need for flexibility, while steadily undermining the flexibility of our own economy? How does the £15 billion a year in extra costs for British business, which result from his taxes and red tape, improve flexibility? How does his tax on jobs and pay, which comes into effect in 10 days' time, or the 15 new regulations introduced every working day since 1997, improve flexibility? Would not the Chancellor be listened to with a little more respect in presenting the case for flexibility if he started practising at home what he preaches abroad?

Mr. Brown

I have here the report of the Heritage Foundation—the most right-wing institute in the United States of America—that says that the economy in Britain is more flexible under Labour than it was under the Conservatives. Did not the shadow Chancellor have to admit: Conservatives … were less responsive to these concerns, and less effective in deregulating, than they should have been."? The fact of the matter is that we have created 1.5 million jobs. The shadow Chancellor said that the minimum wage was an act of regulation that would cost us 1 million jobs; instead, we have created 1.5 million.