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The Prime Minister : We have seen what the Commission is doing in terms of the present health and safety article, and I am not prepared to take the risk of that happening again, with the Commission stretching its responsibilities.
Finally, I am not prepared to envisage a situation in which labour regulation--
Mr. Merlyn Rees (Morley and Leeds, South) rose
The Prime Minister : If the right hon. Gentleman will forgive me, I shall continue.
I am not prepared to envisage a situation in which labour regulation could be imposed on the United Kingdom even if the Government of the United Kingdom, the Confederation of British Industry in the United
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Kingdom and the Trades Union Congress in the United Kingdom had all voted against it, yet that is what the Opposition wish to support. Mr. Rees rose--The Prime Minister : I told the House on 20 November-- [Interruption.]
Mr. Speaker : Order. There are many people outside the House who are very interested in the debate and who want to know what the Prime Minister has to say. I ask the House to settle down.
Mr. Rees : On such an important issue, on which the Prime Minister went three ways, would it not be a good idea if he were to ask the learned Attorney-General to give his view to the House?
The Prime Minister : The learned Attorney-General's view is that which I have expressed to the House.
The proposal is unacceptable, and that is why we rejected it. It is also the view of British industry and commerce and of other people all around Europe that we have made the right decision. Perhaps the Opposition would be interested to hear what the rest of the world says. The Environment Commissioner, Mr. Carlo Ripa di Meana, said that the agreements that we have reached would make Britain "the most attractive country for foreign investment."
The Japanese equivalent of the CBI has expressed concern about the consequences of the social chapter on labour flexibility and wage costs--we know how proud the Leader of the Opposition is of the Japanese investment in his constituency.
The director general of the CBI has said that the agreement has achieved "exactly what business needs". The director general of the Institute of Directors has described the outcome as
"a triumph for British business".
The chairman of British Petroleum has said that he is "delighted", and the chairman of ICI that this is probably as good an outcome as could have been hoped for.
All those people with direct experience of industry are right, and the Opposition are wrong.
I told the House--
Mr. Bruce Grocott (The Wrekin) rose --
Mr. Derek Fatchett (Leeds, Central) rose --
Mr. Speaker : Order. The hon. Gentlemen who are seeking to intervene are Front-Bench spokesmen and know from their own experience that, if the Prime Minister does not give way, they must sit down.
The Prime Minister : I told the House on 20 November that, on economic and monetary union, there must be a provision to allow this country to decide whether--not just when--to join a single currency. That is what we have achieved--precisely, and in legally binding form. As a result, we are uniquely well placed to make a sensible judgment on this important question at the right time. If we do not wish to join, we are in no way obliged to do so. If we wish to join a single currency, it will be open to Parliament to decide to do so at exactly the same time as any of our partners.
Let there be no doubt : Britain is among those who will meet the strict convergence conditions. We took the lead in
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setting them and will continue to be involved at every stage leading up to the decision whether to launch a single currency. Mr. Frank Cook rose --The Prime Minister : There are some who argue that the treaty creates such a strong momentum towards a single currency that, whatever our doubts, we shall be compelled by economic pressure to join when the time comes. I do not believe that. The balance of economic advantage will depend heavily on the circumstances in which a single currency is created--how many member states are involved, and whether the Community has met the convergence conditions. No one can judge now what the situation will be in five or six years' time. No economic pressure could compel this country to join a single currency if Parliament judged the political disadvantages to be too great.
Mr. Alex Salmond (Banff and Buchan) : Will the Prime Minister give way?
The Prime Minister : I believe that it has been right for this country to maintain, as we have done, a two-way option--to go in if we judge it right to do so, but to stay out if we judge it right to do so.
The debate about the European Community is littered
Mr. D. N. Campbell-Savours (Workington) : Does the Prime Minister believe that the existence of the two-way option will help Britain to attract the central bank to the United Kingdom?
The Prime Minister : I think that it will do no harm whatever to our prospects. Many other countries believe that we are wise to have this option. We have all the advantages of determining the conditions up to entry and--uniquely--the right to go in or not, depending on whether it is right for our country.
Mr. Robert N. Wareing (Liverpool, West Derby) : Will the Prime Minister give way?
The Prime Minister : I have already given way nine or 10 times. The hon. Gentleman must let me make progress.
The debate about the European Community is littered with labels for people- -anti-European, pro-European, Euro-fanatic, Euro-sceptic or Europhobe. Those labels are echoes of a healthy debate, but they should not destroy our sense of purpose.
No country has a greater capacity than ours to commit itself to a cause that it believes to be right--the history of this century clearly shows that. Many people in this country have committed themselves to membership of the Community with a similar sense of dedication. They made a commitment to an organisation which they believed would be a powerful force for good. I believe that they were right to do so.
It was right to join, not just for the opportunities that the Community offers as a common market, not even for the economic strength of the Community collectively, but for the collective power of the European democracies to improve the general weight, politically and economically, of European opinion throughout the world. Nothing that has happened in the almost 20 years of our membership causes me to doubt the rightness of the original decision to join the Community.
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Mr. Frank Cook : Will the Prime Minister please, please, please give way?Mr. Speaker : Order. Will the hon. Gentleman please sit down?
The Prime Minister : I have given way on nine or possibly even 10 occasions. I suspect that there are more than 600 hon. Members to whom I have not given way, and the hon. Member for Stockton, North (Mr. Cook) is one of them.
As I said earlier, we attach great importance to the principle of subsidiarity. It is not only a defence of our national freedom of action but a statement of our willingness to co-operate. Such co-operation does not mean compromising our national traditions or institutions--far from it. It means not allowing sentiment to stand in the way of real interests. It is right to be hard-headed in our dealings with Europe, and that was our approach in the negotiations. At Maastricht, we ensured a safer Europe, and we reaffirmed the primacy of NATO. We set the framework of a stronger and more coherent European foreign policy, in which our national independence of action is assured. We strengthened the rule of law in the Community. We established more efficient and more effective institutions, with stronger arrangements for budgetary control.
We gave the European Parliament a greater role in monitoring the Commission. We obliged the Community to respond more directly to the needs of the citizen. We equipped ourselves to fight international crime, terrorism and drug trafficking. We secured provisions that will be good for British industry, and a Community that will be open to the rest of the world.
Our role consistently has been to ensure that the Community does not become self-regardng, inward-looking and over-regulatory. Brussels is a means to an end ; it is not the end itself-- [Interruption.] From their policies and comments, Opposition Members clearly feel differently. In their view, if Brussels says it, it must be right irrespective of the national interest.
There is one critical agreement among the Twelve, which is outside the treaty but in the presidency conclusions, and which I believe is vital for the future of Europe. As we reach the end of the century, it becomes even clearer that the Community does not end with the Twelve. I do not accept-- [Laughter.]
Mr. Speaker : Order. These are not matters of hilarity, as many people outside would agree.
The Prime Minister : I do not accept the conflict, which is often referred to, between deepening the Community and widening it. If the Community ignores what is happening beyond its boundaries and simply concentrates on internal development, it will not become deeper ; it will just become shallower. We must broaden it and open its doors. It would be a tragedy if historians could look back and say that the Community had been sleepwalking through a year of revolutions elsewhere. That tragedy would be compounded if historians were to look back and say that, if only the Community had reached out to the fragile democracies of the east, disasters in those democracies could have been averted.
At Maastricht, the Community committed itself to further enlargement. It did so at Britain's initiative. That
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commitment will be seen as one of the most significant of the agreements to which we signed up last week. In six months' time, Britain will hold the presidency of the Community. In that six months, we hope to start negotiations leading to membership of the Community for Austria and Sweden, and other European Free Trade Association countries. We shall start to pave the way for the eventual membership of the countries of eastern Europe. We shall put in place the last measures needed to complete the single market--a single market that will extend way beyond the borders of the Twelve, even before the new member states join.In the treaty of Rome, the free countries of Europe wove their own lifeline. We now have a responsibility to the other countries of Europe to throw that same lifeline to those countries now embarking on a perilous journey towards stability and democracy. If we were to fail in that endeavour, we should put at risk all the achievements of post-war Europe. The prize if we succeed in that endeavour is enormous.
I see the main task of our presidency next year as being to ensure that the Community matches up to this, its greatest challenge and opportunity--the achievement of a Community open to all the democratic countries of Europe and reducing, perhaps even eliminating, the risk of conflict within the whole of our continent from one end to the other.
That was the kind of Community that we fought for at Maastricht. That is the kind of Community that we wish to build. We can take pride in achieving our goals in this negotiation, and I commend the outcome to the House.
4.20 pm
Mr. Neil Kinnock (Islwyn) : The Prime Minister and I are obviously in agreement about the fact that the European Council at Maastricht was historic. We are obviously agreed that the decisions constitute a beginning, not an end, and that, as a result of those decisions, the European Community will continue to develop economically, politically, socially and culturally. It is also clear that it is our shared hope that the Community will not only enlarge itself but will use its relative prosperity and its democracy to improve its collective efforts to assist in the development of the economies and new democracies of central and eastern Europe. On those, and on other matters on which consensus was reached in the Community, there is broad agreement here.
But the Government have returned from the Maastricht Council with a pair of opt-outs on the most vital matters of economic and monetary union and the social chapter. Their duty was to exert maximum influence on those fundamental issues. That required involvement ; they have chosen isolation.
Sir Anthony Grant (Cambridgeshire, South-West) : Will the right hon. Gentleman give way?
The Government's duty was to resist the development of a two-speed Community. Instead, they have contrived to get a two-speed Community, and they have put Britain in the slow lane. A Prime Minister who said that he wanted Britain at the heart of Europe spent his whole time at the Council getting two escape clauses. That is not the action
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of a Prime Minister who wants to be at the heart of Europe but the action of a Prime Minister who wants Britain at the tail of Europe.Sir Anthony Grant : Will the right hon. Gentleman give way?
Mr. Robert Adley (Christchurch) : Will the right hon. Gentleman give way?
On monetary union, the Prime Minister is proud, as he said again today, of the arrangements which he told us last Wednesday ensure that
"unlike other Governments, we have not bound ourselves to join regardless of whether it makes economic or political sense."--[ Official Report, 11 December 1991 ; Vol. 200, c. 859.]
That is the Prime Minister's justification for the opt-out. The core of the Government's argument is that, while leaders of other countries are taking their people in a gathering stampede to union, our Prime Minister alone stands aloof and unbound with his opt-out.
Sir Anthony Grant : Will the right hon. Gentleman give way?
Mr. Kinnock : Let me develop my speech a little further ; then I shall give way.
Is any country in the Community "bound"--I use the Prime Minister's word-- regardless of economic sense? That is an important question and one that is best answered by examining the treaty procedure for moving to monetary union. In 1996, the Commission and the European Monetary Institute will report to the European Council on whether the third stage of economic and monetary union--the creation of a single currency--can begin. That is not automatic. It depends entirely, as the treaty clearly specifies, on whether the strict conditions for convergence relating to inflation, budget deficits, long-term interest rates and currency stability have been met. The Council must then decide whether to proceed to monetary union. Such a decision can be taken only if a majority of states meet the criteria for convergence. If that convergence is not achieved, the next key date is the end of 1997. If, by then, no date has been set, monetary union will not go ahead, because a majority of states will not have passed the test of convergence.
The treaty then specifies that monetary union will begin on 1 January 1999. However, it will obviously begin only for those countries that have achieved the convergence conditions. It is clear that at every stage of that stringent process nothing will be done--and nothing can be done -- "regardless", to use the Prime Minister's words "of economic sense". On the contrary, whether it is done at all depends entirely on economic sense and on the test of practical economics--whether or not the conditions for economic convergence are met. Every country will have to face that.
Mr. David Sumberg (Bury, South) : In view of the right hon. Gentleman's passion for European unity, will he explain to the House and the country why he voted against the Single European Act?
Mr. Kinnock : The reason is straightforward and if the hon. Gentleman examined the proceedings in respect of that legislation, he would very easily discover the answer.
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There was absolutely no commitment on behalf of the Government to the strength of social dimension that we want for the British people.Several Hon. Members rose --
Mr. Speaker : Order. Many of the hon. Members who are trying to intervene want to participate in the debate. Trying to intervene now may not be very happy for them later.
Mr. Kinnock : As I was making clear--
Sir Anthony Grant : Will the right hon. Gentleman give way now?
Mr. Kinnock : I will give way in due course.
I was making it clear that every country must face that basic test which ensures that they must make economic sense in terms of convergence. No one can act regardless of that consideration.
Mr. Nicholas Budgen (Wolverhampton, South-West) : Will the right hon. Gentleman give way?
Mr. Adley : Will the right hon. Gentleman give way?
Mr. Kinnock : I have said that I will give way in due course. The position of the Tory party and of the Prime Minister is unique, because even if the terms of convergence are satisfied, and even if monetary union goes ahead, they are still prepared, they tell us, to opt Britain out of monetary union. The consequences of such a decision would be very severe for the United Kingdom. They would be so severe that they would inflict great disadvantage on our country and on our people. That is why we believe that it would be wrong for Britain to opt out if the convergence conditions were achieved.
Mr. Adley : The right hon. Gentleman seems to have enunciated an interesting new doctrine that no cake is better than half a cake. I want to ask the right hon. Gentleman a straightforward question : will he name one specific proposal from Brussels that he finds unacceptable?
Mr. Kinnock : There are several. For example, the very long dated and hitherto insufficiently reformed proposal from Brussels--the common agricultural policy in its present form--is totally unacceptable. [Interruption.] The thing to do is not to opt out, but to stay in and fight one's corner.
Mr. Kinnock : I will give way in due course. I have been speaking for only a few moments and I have already given way twice. I have given undertakings that I will give way and I will do that in due course.
I was beginning to tell the House why it would be very disadvantageous for our country to use the Prime Minister's opt-out clause at the point of formation of union and given that convergence conditions had been satisfied. First, if the opt-out was exercised, our country would certainly stand to lose inward investment. Inevitably-- [Interruption.] He is at his mother-in-law's funeral. Will you stop that stupid nonsense? [Interruption.]
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Mr. Kinnock : Our country would certainly stand to lose inward investment because investors inevitably would choose to put their resources in the countries that were part of the monetary union rather than in one that was outside it and subject to continual currency risks. Secondly, of course, the United Kingdom would stand to lose British investment, because to gain access to the European single market with a single currency and no foreign exchange costs serviced, British companies would choose to invest in the monetary union countries. Thirdly, if the Prime Minister opted out, the City of London could not maintain its pre-eminence. A banking centre such as Frankfurt that was inside the monetary union would become the European financial capital, with all the obvious consequences for finance, earnings and employment in Britain.Mr. Anthony Nelson (Chichester) : As the right hon. Gentleman has already said, the agreement at Maastricht imposes strict disciplines on Governments, on the amount that they can borrow in order to finance their public expenditure. As he supports that so wholeheartedly, what calculation has the right hon. Gentleman made of the extent to which taxes would have to be raised under a Labour Government to pay for their expenditure programme?
Mr. Kinnock : The current Government are running, on their own estimates, toward a £20 billion public service borrowing requirement. They have raised taxes to the point at which they levy the highest tax burden on the citizens of this country of any Government in history. They have sensibly got extra flexibility into the fiscal deficit requirements in the Maastricht treaty, and that is extremely useful, but monetary disciplines are, of course, essential. What is important is that the domestic and the Community policies of all of the countries in the Community operate in such a way as to ensure that we do not arrive at the situation that we in Britain are in at present, where by perpetual deflation the Government have lower inflation, but at the cost of raising the fiscal deficit. Why does not the hon. Gentleman learn the lessons?
Mr. Budgen : Will the right hon. Gentleman give way?
Mr. Kinnock : I will give way in due course.
Despite those disadvantages in terms of inward investment, in terms of domestic investment and in terms of the City of London, the Prime Minister would still think that all that was worth paying as a necessary price, as he put it three weeks ago, to keep control of monetary policy. But if there was monetary union, what real control of monetary policy would there be? If our neighbours formed a single currency area within which we had free capital movement and with which we did 60 per cent. of our trade, what control of monetary policy would exist in reality? None is the truthful answer to that question. The United Kingdom would be a satellite of the monetary union, exerting no pull, no power and no leverage. Our country would drag alongside the monetary union, pinioned to it by economic realities.
Mr. Budgen : Does the right hon. Gentleman accept that many influential people in Europe believe that coherence or convergence can be achieved only by very considerable increases in expenditure on regional and social funds and upon the cohesion fund? Will he be good enough to give
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the House some idea of what sort of expenditure will be in place or whether, perhaps, it would be funded by an increase in VAT or by a general increase in taxation? We would like to know what the cost of the pre-conditions of monetary union would be.Mr. Kinnock : As we make clear in our policy documents, we consider that funding of the common agricultural policy is so large and misapplied in terms of the needs of the European Community that it must be the major source of reorientated finance for the development of cohesion in the Community. That must be so. If the Government really had in mind the welfare of the whole United Kingdom and, indeed, a proper contribution to the development of the Community, that is what they would have battled for not only at Maastricht but on all previous occasions.
As we know that Britain will have the possibility of opting out at the time of monetary union, given its convergence with the performance of the remainder of the Community, the practical question that must be asked is : what would be the meaning of the Prime Minister's opt-out clause at that point? Indeed, what is its validity now? Either the clause means that even if we achieved convergence the Prime Minister would still opt out for some reason, despite the huge disadvantages to industry, investment, finance and jobs, or it means that, because the convergence conditions had been met and the practical penalties of staying out were obvious, the opt-out clause would be redundant. We would be in exactly the same position as every other Community country capable of joining the monetary union. The Prime Minister should tell us now what could be the reason, other than failure to achieve convergence, for not recommending entry to a monetary union that was being formed. He should answer that question. He would have to give a very good reason, because there is a heavy price to be paid for the Prime Minister's opt-out. That price has to be paid not at some vague date in the future but soon. First, by the end of 1992, the vital decisions on the location of the European monetary institute and the European central bank must be taken. Those decisions will clearly depend directly on whether the country where the bodies are located will continue to be part of the union process. A country that had opted out could not and would not even be considered.
Mr. Jim Sillars (Glasgow, Govan) : Will the right hon. Gentleman give way ?
Mr. Kinnock : I know that the hon. Gentleman wants Scotland to opt out of everything, even the real world.
So long as the Prime Minister's approach on opt-out prevails, neither the institute nor the bank will be located here, despite the risks that will result for Britain's financial services industry, which earns £14 billion every year for Britain.
The Chancellor of the Exchequer (Mr. Norman Lamont) : The significance of the opt-in clause-- [Interruption.] The significance of the clause is that we believe that it is right in principle that Parliament should be able to make the decision. The right hon. Gentleman has said that he does not like the arrangements for the central bank : it is too powerful, too independent and he does not like it. If that is his view, why is he prepared to say now that so long as convergence is achieved --that is
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what he is saying--he will give the commitment now irreversibly to join a single currency ? Why does he not want Parliament to have the right to decide ?Mr. Kinnock : Opt-in, opt-out, shake it all about. It is obviously the hokey-cokey clause. On the Chancellor's first point, I repeat what I said in the previous debate that we had on this subject. Of course, barely a month and certainly not a Council will go by without Parliament being consulted and certainly no basic decision about our well-being in the Community will be taken without the assent of Parliament. That is the fact of the matter.
Secondly, on the European central bank, we have repeatedly proposed--as the right hon. Gentleman may have heard, some of his colleagues in the Community support our proposal--a relationship between ECOFIN--the representative body--and the independent central bank closely modelled on the German system that has developed with such success. Indeed, we want to bring the proposals that are before the Community now closer to that German system. I would have hoped that the Chancellor would campaign for that. I would have hoped that he would see the sense of it.
I would have thought that, as Chancellor, the right hon. Gentleman would seek to ensure that the general requirements on the proposed European central bank to conform to the general economic policies of the Community would be taken seriously and applied literally.
Mr. Norman Lamont : I am afraid that the right hon. Gentleman is wrong about the bank. The arrangements in the treaty and the treaty amendments are precisely those which the Germans wanted and precisely those modelled on the Bundesbank. That is the whole point of it. Why does not the right hon. Gentleman answer the question? Why is he not prepared to admit that he is committing his party irrevocably to move to a single currency?
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