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Mr. Budgen : Will my hon. Friend give way?
Mr. Spicer : I cannot give way, because I have only five minutes in which to finish my speech. If I have time at the end, I will give way.
The single currency implies not just, as some have argued, the narrow concept of money printing. If one is to manage a currency, one has to manage not only the printing of currency, but the fiscal policy around it. Therefore, ultimately one has to manage the taxation and public spending policies associated with the single currency. Indeed, the treaty talks in these terms and provides for the embryonic institutions that will be given total and comprehensive control of all matters concerned
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with running a single currency. There can be no question but that a move towards a single currency is a move towards a federal united states of Europe.The third reason people give for supporting the Bill is that it will not work. Their attitude is, "Don't worry--sign it ; because it won't work." That is a very un-British thing to do. On the whole, we have been very respectable about that, and have signed treaties because we think that they will work. Therefore, it is logical, proper and moral for us to look at the black and white of the treaty. Furthermore, there are sound precedents for doing so. Only this week we faced the black and white of previous treaties that we have signed and the implications of them.
My right hon. Friend the Member for Mole Valley (Mr. Baker) made a telling point yesterday, when he raised the question of article 8a of the European Single Act, which deals with immigration. Unfortunately, we have already discovered that declarations do not count or are in some doubt, so we have to go to the text, and the text of this treaty is clear on a number of specific issues concerned with setting up institutions that will then have a pull and momentum of their own. There is no point in saying that we will sign the treaty because we think that it will not work, that the Danes will help us and that the French and the Germans do not like it. That is not the point. We shall sign something and, with the assistance of the European court, this black and white legal document will be implemented.
The fourth and final reason given for voting for the treaty is the British opt-out. I agree to this extent with the hon. Member for Newham, North- West. I can imagine, when we have set up the institutions and signed in principle to the treaty, the whips coming up to me and saying, "Look here, Spicer, you are talking about this opt-out as if it were a real option. Have you gone completely out of your mind ? We have set up the institutions and everybody is joining them. The whole thing is in place. You are out of date. You have got to go along with us. You can't possibly, under these circumstances, start thinking the whole thing out again. We signed it all in 1992. Weren't you there ?" The thing will be set in concrete by then. What is the point of it all ? What are the benefits ? I can see certain costs in terms of the threat to our own peculiar--I say that in an admiring way--form of democracy, a form that is not, for example, shared in France. Compared to the British Parliament, the French Assembly does not count for a fig.
I can see certain threats, and to that extent I agree with the Opposition Front Bench. I can see certain security issues arising in future. I accept, of course, that the Western European Union is linked to NATO, but the Americans will not necessarily see things that way. I can see the foundations of NATO beginning to be threatened and ultimately to crumble as a result of the treaty. I hope that the Opposition will join in some great march in favour of British security, British defence and NATO. We have seen an enormous change in the Opposition's position in this. An interesting point was made by the right hon. Member for Manchester, Gorton (Mr. Kaufman) when he told us where he stands.
Finally, there is the question of economics. We are at the centre of world trade, we are a high-seas trading nation and we gain by being at the centre. Will we start to move towards the periphery ? If we do, there will be no gains. I say that the Bill is bad for Britain, and that it should be rejected.
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8.31 pmMr. Brian Sedgemore (Hackney, South and Shoreditch) : When I woke up on the morning of 10 April to the full horror of the result of the general election, I felt like one of those demonic figures in Francis Bacon's paintings with tangled, sawn-off brains and see-through faces. I wanted to scream. Inwardly, I have been screaming ever since. All of a sudden, however, I feel better.
We are meeting in this historic debate to confess that we now accept that sovereignty is a myth, that national independence is an illusion and that a love of parliamentary democracy is the fashionable excuse of those who so long for yesterday that they cannot face tomorrow. Tonight, we begin to draw a veil over parliamentary democracy as we have know it since 1832 ; tomorrow, we begin to unveil a new democracy. Our powerful, over-arching and over-centralised system of government is about to give way to a devolved European pluralism.
Thank God, say I, that there are forces greater than this shrivelled Government and beyond this fatally flawed and divided island that will henceforth share in the control of our destiny. A nation such as ours, which has lost its soul and whose politics is as morally and intellectually bankrupt as the smile on the Minister's face, desperately needs tolerant, decent and civilising influences from Europe, inspired by social democratic ideas, to provide the prevailing ethos.
I have always believed that humility is a great virtue. The House is therefore to be congratulated tonight on recognising that what we have here in Parliament is a little theatre. It is a little palace of varieties. Anyone who thinks that I am being unfair should recall the Prime Minister's speech yesterday. I can paraphrase it in two sentences : "Under this treaty the gradual move towards federalism over the past 20 years has been reversed. We are now moving away from a federal goal as fast as we can." What nonsense. What the Prime Minister said was an abuse of language. The words in the treaty cannot possibly bear the meaning that he ascribed to them. As the Prime Minister spoke, I was reminded of my days at university when we used to discuss the philosophical problem of the theory of the undistributed middle. The question was whether an object can be black all over and white all over at the same time. Yesterday, the Prime Minister answered the question. He said, "Yes, of course it can." I must tell the Prime Minister that, just as it would not be obvious to a member of the British public that something can be black all over and white all over at the same time, so it would not be obvious to a member of the public who read the treaty that it is a determined rejection of federalism. Indeed, giving its words their ordinary and natural meaning, a member of the public would most likely conclude that the treaty is a significant move towards federalism.
We have in Parliament a theatre in which everyone, including the principal actor, can say anything he likes in as boring a fashion as he likes, provided only that he does not tell the truth. Having listened to the debate, I have come to the conclusion that we, the British, have been brought up to believe that the English Channel, fog and the inability of foreigners to understand our peculiar ways have cut off the continent from Britain.
As a nation, we bask in the unconscious realisation of our effortless superiority. Whether or not it is true that
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Jesus was born in Bethlehem--and we doubt it --we know that God is an Englishman, and that, had we not become a secular society He, God, would have gone to Maastricht on our behalf and pulled down the temples of Europe.In Britain, we understand political theory so little that we easily confuse notions of sovereignty, identity and accountability. In our confusion, we fear the French, the Italians, the Greeks and, above all, the Germans. The recently dethroned Prime Minister, who in her lonely torment is learning that politics is a struggle to be remembered, is afraid of the Germans. She was at it again last week. She has allowed her prejudices to be ignited by Professor Norman Stone, a wayward, besotted and populist historian from Oxford university. He is best known in academic circles for presenting low- grade flights of political fantasy as facts.
Likewise, our current Prime Minister is scared to death of Germany's economic strength. He is so afraid of it that he tries to deny that it exists. It is not so long ago that he was telling us, in an effort to excuse his own enfeebled economic performance, that Germany was in a recession. Looking closely at the gross domestic product data, I conclude that only a hapless economic dunce or someone prone to Freudian wish- fulfilment dreams--the Prime Minister may fit both categories--could conclude that Germany is in a recession or has been in a recession.
So why does our Prime Minister want to talk down the German economy? It is time that he woke up to the fact that such is the scale and nature of our trade with our EC partners today that Britain's export performance now depends crucially on the existence of enterprising and successful economies throughout the EC. I am shocked that there are still Members, including the Prime Minister, who do not understand that, inside a developing Europe with a single currency, there can be no reason and no excuse for
beggar-my-neighbour economic attitudes.
In a sense, that is the crunch and that is the problem--Britain's opt-out clause over the creation of a single currency that should provide the economic and political bedrock for stability and prosperity in Europe. Instead of putting distance between ourselves and the creation of a single currency, we should be seeking to produce new ideas on economic accountability and further political union to buttress the new currency.
Our Prime Minister justifies Britain's opt-out clauses on the creation of a single currency and on the social chapter by saying that we, the British, bring pragmatism to the discussions on Europe. I remind the cacophonous dissidents and discordant mavericks on the Opposition Benches who agree with him that pragmatism and hypocrisy go hand in hand and have formed the basis of Tory ideology for 100 years. In my view, Europe needs the dynamic of ideas rather than the pragmatism of the supermarket if it is to advance and provide a bulwark for freedom and civilised living.
Maastricht has barely touched on what is needed in the political sphere. On political union, the treaty represents very much a bits-and-pieces solution to the problem. It lacks a certain coherence. Having said that, Maastricht represents an exciting challenge for socialists in Europe through to the end of the century and beyond. It provides us with new ways of thinking and new ways of viewing the world and politics. Laissez-faire economic principles will be allied to the EC's natural interventionist social and political dynamic. The Bruges Group are not entirely brain-dead ; they have sussed this out, and it terrifies them.
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So the history of ideology, far from having ended, as we have been told recently, is about to be redefined in the context of a pluralist Europe. I think that is good. I would like to vote in the Aye Lobby tonight, but as one of life's natural cowards, I will do what the Opposition Whips tell me.8.39 pm
Mr. Ivan Lawrence (Burton) : For those of us who believe that we should be in the European Community because it will be good for Britain but that we do not want to go down the road of a federal super-state, the question is whether Maastricht centralises us and leads us closer to the federal super-state or leads us further away from it.
That question is difficult to answer, so we look for guidance to those who really know about these matters. My right hon. Friend the Prime Minister has said that this treaty is a reversal of the trend towards centralist and federalist control--and I am a great admirer of my right hon. Friend. Our former Prime Minister, Margaret Thatcher, says that the treaty moves us towards central control and federalism--and I am a great admirer of Mrs. Thatcher. So I do not appear to have much guidance from those who should be guiding me. When we add up all the indicators which show that we are moving closer to federal control, and balance them against the number which show that we are moving further away from central control, we are asking ourselves, what is the meaning of subsidiarity? What will that newly defined concept mean in terms of moving either closer to or further away from centralism? That is the item in the shop window which my right hon. Friend the Prime Minister displayed as the main indicator of moving further away.
According to article 3b :
"the Community shall take action only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can be better achieved by the Community." To begin with, that is a very vague concept. If it is thought that it means that any decision should be taken at the lowest possible level, that unfortunately makes me believe that the concept is not all that it is cracked up to be, and for a number of reasons. First, it should mean--but it does not--that decisions which do not bear on or affect other member states should remain with the nation state or below. Community action will be allowed wherever such "objectives of the proposed action", such as a high level of social protection under article 2, would "be better achieved by the Community". Therefore, the concept of centralisation will apply even where something concerns only one member state if it conforms with the objects of the Maastricht treaty.
Secondly, as the concept is one of devolving powers downwards, inevitably it will be the Community which decides the residue decisions with which it does not wish to deal and which should be devolved downwards--the crumbs from the Community table. That may be challenged by the nation states in the European Court, but, as my right hon. Friend the Foreign Secretary conceded this afternoon, that court has usually reflected integrationist tendencies.
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Thirdly, subsidiarity applies only to those areas which "do not fall within the Community's exclusive competence", so it cannot apply to vast areas of law, such as all internal market measures and probably most of the existing social provisions which apply to the workplace. In other words, it has a most limited scope.Fourthly, although subsidiarity was not defined in the Single European Act, it was certainly understood to be a principle which applied. When the Foreign Affairs Select Committee went around Europe asking how that Act was likely to work, we were told that subsidiarity applied. We kept asking people what it meant, but nobody could tell us.
Sunday trading, for example, is something that one would think was a national matter with the subsidiarity rule applying, yet the Commission has found reason to claim that matter to itself. It says that Sunday Trading will have an effect on the importation of goods. Another example is the social charter, which we are told is a matter for European Community control because of its potential effects on the competitiveness of business. Therefore, although one might think that hours of work would be a matter for internal national control, they will be dealt with by the Community if it can get the subsidiarity principle interpreted in that way.
Fifthly, subsidiarity will not stand in the way of the Community if the institutions want to claim power--as they will. We need only look at the institutions. There are 17 Commissioners, each with a vested interest in making his or her portfolio as important as possible. They are underpinned by civil servants, who are well-known empire builders. That is the institution which will be claiming the subsidiarity principle in its favour.
There is the European Parliament, which no one could deny is power-hungry. There is the European Court of 13 judges who will interpret the rule. They would not be there unless they shared the European ideal and believed themselves to be an integral part of the process of European unity. As my right hon. Friend conceded, they have unashamedly acted as architects of European integration. Subsidiarity is too vague, and it will be worthless as a protection against expansion to the centre. Subsidiarity may be even worse than worthless because if people of the intellect of my right hon. Friends the Prime Minister and the Foreign Secretary believe that it will be some protection when in fact it will not, that illusion may lead to a great deal more movement to the centre than they would like to see. I regret that I have to conclude that the omens for retaining national control of vital areas do not look good. If subsidiarity is all that we have to distinguish between the balance struck between those matters which obviously move away from the centre and those which obviously move towards it, subsidiarity does not look strong enough.
My right hon. Friend the Prime Minister said :
"This decision is too important to be an act of faith--it must also be an act of judgment, and that judgment cannot sensibly yet be made."--[ Official Report, 20 May 1992 ; Vol. 208, c. 265.] Of course, he was talking about the single currency, but it would apply equally to the whole question of subsidiarity and a drift towards central control.
All those matters disturbed me greatly, and I spent yesterday and today worrying about how I should vote tonight. In fact, I have come down in favour of supporting the Government. I am not someone who slavishly supports
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the Government--if I did, I might have been more fortunate in finding favour with my Front Bench. The fact is, however, that we cannot think of a practical alternative to being in the European Community for the good of Britain at the present time. That is the bottom line. We have to be there for as long as we possibly can for the good of our constituents, our workers and our industries, and to achieve the benefits of peace and security which being part of the EC brings us.It would have to be a very strong reason indeed to make us take a step which might lead to our having to pull out of the Community. I do not think that the Maastricht treaty is as strong a reason as that. It is not all it is cracked up to be, but I do not think that it should destroy our place in the European Community and our ability to stay there. I believe I owe it to my constituents to support remaining in the Community.
However, I say to my right hon. Friends that I voted for the Single European Act having gone through the same process as I am going through now, and I reached roughly the same conclusion. I have already been told, "Why worry about Maastricht--you sold the pass with the Single European Act." I do not want anybody from my Front Bench or any Whip coming to me in 1996, when I come to consider whether there should be a single currency, a central bank and central control--
Mr. Deputy Speaker (Mr. Michael Morris) : Order.
Mr. Lawrence : If I may just finish--
Mr. Lawrence : I do not want--
Mr. Deputy Speaker : Order. The hon. and learned Gentleman has had his 10 minutes and other hon. Members wish to speak.
8.49 pm
Dr. Jeremy Bray (Motherwell, South) : The treaty of Maastricht and convergence towards economic and monetary union set a steep and challenging path. The Government face a problem. Should they spell out the difficulties and dangers on the path that they have set and the greater difficulties of alternatives, or should they rest thankfully on the majority cross-party consensus that the goal of EMU offers the best path forward? Whatever the Government decide, it is the duty of hon. Members who see the dangers to spell them out clearly. That hon. Members on both sides of the House are doing. I do see the dangers, but I do not see a way out of them in seeking a realignment, abandoning economic and monetary union or weakening the exchange rate mechanism. So I cannot go along with my hon. Friend the Member for Dagenham (Mr. Gould) and my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore), still less the Euro-sceptics on the Conservative Benches.
There are undoubted advantages to industry, trade and jobs, in exchange rate stability with our principal trading partners and further advantages in interest rates which do not carry a heavy risk premium covering the expectation of a future devaluation. If British goods can be made more competitive by reducing their price, fine, but devaluation will not achieve that for a long enough period to affect the balance of payments and jobs. Our price and wage determination
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practices will inflate away the benefit of lower export prices as people try to cope with higher prices of imports and so of goods in the shops. In addition, adjusting the exchange rates has the effect of extending the period which it would take to re-establish belief in the maintenance of the exchange rate, with higher interest rates in the meanwhile.Certainly these are matters of judgment. Certainly hon. Members, especially Chancellors, must make those judgments. Perhaps price and wage determination practices will change. Perhaps a new national consensus will be reached on an efficient and fair distribution of income and wealth which will remove inflationary tendencies with the nation no longer trying to get a quart out of a pint pot. Certainly we should never give up striving to educate people in the facts, if not of life, at least of our economic circumstances.
I have long believed that it is sensible to look at the record of our success--to examine the evidence. First, there is the industrial evidence. Let me give an example. We are currently trying to increase the United Kingdom share of the European steel market by attracting a new generation new technology steel plant to Hunterston in Scotland to replace the great integrated steel works that my constituency is losing.
The possibility of our success in attracting new industry would disappear if we could not rely on maintaining a large cost advantage not only over British Steel but over Germany. The same would be true of much of the new manufacturing capacity which we must create in this country with today's integration of industrial markets. Such argument about particular industrial projects may be dismissed as anecdotal, so I have tried to look at the wider economic evidence. Somewhat eccentrically for a Member of Parliament, I have not only run the Treasury model, but joined the London Business School, the National Institute of Economic and Social Research and Oxford Economic Forecasting--the leading modelling and forecasting teams which publish the detail of their work. We published the results shortly before the election as a Warwick university discussion paper. It remains the only systematic comparative examination of the medium-term prospects.
All the forecasts imply persistent current account deficits into the medium term of between 1.5 and 2 per cent. of GDP. Moreover, those deficits arise despite the fact that, in the light of recent increases in exports, all the forecasts increase exports above the levels reflecting world trade and United Kingdom price
competitiveness. Those adjustments are, in effect, an assumption of continuing improvement in non-price or technological competitiveness, reflecting the recent improved performance of United Kingdom exports. That has stabilised and slightly increased the share of United Kingdom exports on world trade after three decades of steady decline.
The main implications for policy are that the projections for the current account, even on those optimistic assumptions, are based on some fairly fragile extrapolations. The downside risks for the current balance to the exchange rate during the transition to EMU could be considerable. The longer the delay in recognising the problem of the deficit, the greater the risk that subsequent policy tightening may be so severe as to create another recession in the mid-1990s such as we have been plunged into since 1987.
If the problem is recognised early enough, stronger supply side measures could be taken to improve non-price
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or technological competitiveness. Although those policies take time to work and are neither costless nor risk-free, they do not have the disadvantage of restrictive demand policies which reduce growth and increase unemployment.My own estimate from the Treasury model is that we need to increase exports of manufactures by 2 per cent. or some £2 billion per annum faster than would be indicated by world trade and relative prices--that is, by increasing our technological competitiveness. We need to keep up that pace of improvement for a full decade. That conclusion is not out of line with considerations that the Chancellor must have had in mind when, in speaking to the CBI, he called for a rate of inflation
"not only below the European average, but as low as the best in Europe measured on a comparable basis"--
which he quantified as 2 per cent. What the Chancellor did not say is that even that rate of inflation will not be enough unless there is a major improvement in technological competitiveness.
That is a challenging but not unattainable target. It means that supply side policies must be at the heart of the Government's economic and industrial policy as we approach EMU, as it would have been of the Opposition's had we been in Government. Maastricht sets the path, but the mountain that we have to climb is still there whatever path we choose. The prospects for the country depend on our being prepared to climb the mountain.
8.56 pm
Mr. Peter Temple-Morris (Leominster) : I am grateful to you, Mr. Deputy Speaker, for calling me in the nick of time. I am also grateful to both Front-Bench spokesmen for allowing me to eat into their time. I promise that I shall not eat into too much of it and for that reason the House will forgive me if my remarks are somewhat truncated.
Standing here amidst this sea of scepticism, I hope that none of my hon. Friends will have apoplexy if I say that I am at least one hon. Member who will vote for the Bill with great pleasure. I have no hesitation in saying that it represents, as does the Government's attitude to it, very much what I want and, much more important than that, what is best for the country. Having said that, I must tell my hon. Friends that they must come to terms with the decline of national sovereignty in a much smaller and mutually dependent world. That is a generalisation, but it is extremely relevant.
In all the major policy areas--I shall touch on three briefly now--we are effectively coming together anyway because of the extent of our mutual dependency. That goes for financial policy. We can hardly move without our friends and allies. That goes also for foreign policy and, even more so today, for defence policy.
Economic and monetary union will be a reality. Europe will have its ups and downs, convergence may be difficult, and there may be delay--but EMU will come about in 1997 or 1999. It may even be deferred. Rather than go on ceaselessly about national attitudes, the alternative must be faced that, if we were left outside EMU, we would have to follow virtually every move within it. We would be unable to do that, and I do not fancy a Britain that specialises in making Swiss watches or chocolates, or provides eager members of United Nations peacekeeping contingents.
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When I arrived in the House more than 18 years ago, an old stager told me that foreign affairs debates were major occasions. I am sure that I will not alarm my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs when I say that, short of a regional war, my right hon. Friend, like me, is well used to addressing the House on a Thursday night on a one-line Whip, or on a Friday morning.When such debates occur, the Diplomatic Gallery is empty. The old stager told me that, in the days when Britain had influence in the world, the Diplomatic Gallery was full for foreign affairs debates. It is significant that, when my right hon. Friend the Prime Minister made his speech yesterday, not one ambassador or even a diplomat was sitting in the Gallery. There were a few Commonwealth Parliamentary Association and Inter- Parliamentary Union guests present, and we were delighted to see them. I hope that that puts matters into perspective for some of my rather reluctant hon. Friends.
Defence matters must of course be decided by intergovernmental co- operation, and of course America must remain in Europe. NATO must also stay --although it will change within itself. There is such a thing as burden- sharing. Uncle Sam will not go on paying. The name of the game is to reorganise in such a way that we keep Uncle Sam here, but without his feeling that he is paying all the bills. Republicans will not rule for ever. The Democrats live in hope, in the same way that the Opposition do in this country. It may be that America will not be as eager to play an active world role for which, to an almost frightening extent, it is wholly responsible.
Europe seems to be undefined in the treaties. We talk about new states joining Europe, but they are not defined. The criteria are all-important. If the Community enlarges too quickly, it will be in danger of collapsing, and certainly of losing its credibility. It is all very well talking about enlargement, but when we can barely afford convergence, it is a little early to speak of gross enlargement.
As to our national interest--I am not entirely an
internationalist--there is a somewhat over-eager rush to help all our friends in eastern Europe for understandable political motives, but that should not be done in such a way that they will make more and more of commodities that we already have in abundance. That is as true of agricultural products as it is of Polish steel. Otherwise, we will be flooded from every direction.
Some of the current applications are easy to consider. I refer to Austria, Finland, Norway, Sweden and Switzerland. The task will be more difficult in respect of eastern Europe and the Baltic states. Some applications will come from countries that arguably are not European states. It is difficult for me to say this, because I have visited Turkey for years, and I am the senior surviving officer of the Russian group in the last Parliament. I do not suggest that we should not have close relations, and the words of my right hon. Friend the Secretary of State in respect of enlargement were significant. However, when it comes to Turkey, the pass was sold in the 1963 association agreement.
We also have the Council of Europe's membership to consider--but the old defence considerations that used to dictate our attitude have largely gone. Applications must be considered in that light, quite apart from democratic qualifications.
Russia is not a wholly European country, and if we were to try to take it on, our political and economic
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digestion would completely explode. No doubt my hon. Friend the Member for Worcestershire, South (Mr. Spicer) would be very happy to see the Community suitably demised. I am sure that I am agreeing with my hon. Friend now.This country has a world role, and is a good and worthy world influence. That has been proved again and again. I am pompous and conceited enough to suggest that Europe needs us. It needs us historically, to maintain the power balance that without us would be outweighed by other elements.
I am not getting at Germany in any way ; I am merely stating the realities of history. Europe needs us for the power balance, but it is important to remember that we also have an obligation to the smaller countries in the Community. If we were not always looking at our own navel and arguing about whether we want to be in Europe or not, we would recognise that those countries occasionally ask us for a lead, and expect us one day to have the foresight and wisdom to give them that lead.
For that reason alone--quite apart from our future as a country in the world, and the sort of role that we want--we belong in Europe. We certainly should not be languishing outside it.
9.5 pm
Mr. John Smith (Monklands, East) : Yesterday, the House heard a record number of maiden speeches. Many new Members took part in our extended proceedings, and it has been widely agreed that all their speeches were of a very high quality. I was pleased to note the number of excellent speeches made by Opposition Members, but fairness requires me to add that Conservative Members made excellent maiden speeches as well.
Today, we have heard only one maiden speech. It is as if the great desire to speak were held in check by the need for people to recover from yesterday's events. The hon. Member for Blackpool, South (Mr. Hawkins), however, broke his duck today, and we welcome him to the House. He paid the customary but--in this instance--well-deserved tribute to his predecessor, Sir Peter Blaker. He also revealed that he entertained some doubts about voting for the Government tonight, but managed to reassure the Whips by concluding that he would do so none the less.
It looks as though the hon. Gentleman will spend some time in this place, and he has already started off on the right note as far as his political career is concerned. [ Hon. Members :-- "He is a lawyer."] Let me say immediately that it is of no significance that he is a lawyer. There is no clear and convincing evidence that they are any more servile than the rest. That is what lawyers might call a rebuttable assumption.
This debate is but the latest in a series of important debates that have preceded and followed the intergovernmental conferences and, of course, the Maastricht summit. It is right that the House should give the fullest consideration to issues that are of profound importance to the future of the European Community, and to our own future as one of its leading members.
In our debate on 21 November last year, which preceded Maastricht, I made some observations about the history of our approach to Europe. I should now return briefly to that theme, by way of introduction to the matters that we are discussing now. I believe that the constant tendency in this country has been to underrate the forces
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behind the continuing move towards European integration. It started in the 1950s, when Britain did not even attend the Messina conference which led to the birth of the Community. It was thought that it would not happen or that, if it did, it would not amount to much. I believe that we made a similar error of judgment in assessing the potential success of the establishment of the European monetary system in the 1970s.With the perspective of hindsight, we can now see how wrong such judgments were. We realised eventually that we could not afford to remain outside the European Community--and, similarly, that it was to our advantage to join the exchange rate mechanism of the European monetary system. The lesson seems to be that we eventually join, but we join late in the day. We should now appreciate that one of the penalties of standing back is lack of influence on the design and development of European institutions that have an enormous impact on our affairs. We should seek not to repeat such errors in the decade ahead.
No one knows for certain whether a single currency will be achieved by the end of this decade, as the treaty proposes, but it is vital to appreciate the impetus behind the movement towards economic and monetary union. Two crucial factors are that by the end of this year the single market will be well established. Every member of the Community, bar one, is already a member of the exchange rate mechanism.
These are reflections of growing financial and economic interdependence, which is of course a worldwide phenomenon but which is particularly noticeable within the European Community. Industry, commerce and finance are increasingly operating across national borders. Capital movements have been almost entirely liberated over the whole Organisation for Economic Co- operation and Development area, let alone within the Community.
It is vital that we should recognise that this is a wholly different economic and political environment from that which existed in the 1960s and 1970s. Our appreciation and assessment must reflect these changes. It seems to me essential that we should recognise the limits of theoretical national sovereignty that the real world we live in impose. Perhaps one of the starkest examples of that reality was the raising of British interest rates to 15 per cent. in October 1989, which followed a decision of the Bundesbank and which occurred more than a year before we joined the exchange rate mechanism. On the day that British interest rates were raised, we had theoretical national sovereignty for about 25 minutes.
The fundamental lesson that I draw from that is that, whatever are the precise financial systems constructed by the Community, whether we participate in them or not, we cannot isolate ourselves from the decisions of others.
Mr. Peter Shore (Bethnal Green and Stepney) : It is just conceivable that my right hon. and learned Friend learned the wrong lesson and drew the wrong conclusion from that experience. The truth of the matter is that the then Chancellor of the Exchequer had the option of either adjusting his interest rates to those of the Germans or taking the strain on the exchange rate. If he had thought it to be in the national interest to have a somewhat lower exchange rate, he could have held his interest rates at that level and let the exchange rate fall. That might have been, in the circumstances of the time, a very good thing to do.
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The point, however, is that he had the choice, whereas my right hon. and learned Friend is pursuing a line of policy that will leave us with no choice at all.Mr. Smith : I wonder whether he did have so much of a choice after the Bundesbank had raised its interest rates? It seems to me--this is characteristic of most of his interventions in these debates--that my right hon. Friend is stuck in the world of the 1960s and 1970s and that he has not perceived the changes in the 1980s and 1990s that have arisen from, among other things, the operations of multinational companies and deregulation. My right hon. Friend often argues about the desirability of floating exchange rates. We had these high levels of interest rates when we had floating exchange rates and before we entered the exchange rate mechanism.
Mr. Leighton : Will my right hon. and learned Friend give way?
Mr. Smith : As my hon. Friend probably wants to follow up that point, I shall give way to him.
Mr. Leighton : Is it not the case that, since that historic occasion, the Bundesbank put up its interest rates by 0.5 per cent. and we did not do so?
Mr. Smith : We are now in the exchange rate mechanism. I do not know what conclusion my hon. Friend draws from that. However, when we had a floating exchange rate, our interest rates were very high. Moreover, despite the so-called advantages of floating exchange rates, we also had very high levels of unemployment during that period, though they were caused substantially by the policies that were followed by the Conservative party.
One of the most important tasks is to recapture the influence that Governments ought to have over economic and monetary policy. In a world in which industry and finance operate internationally, Governments--if they are to be effective--must do the same. In order to regain a lost sovereignty, a sovereignty lost by the
internationalisation of economics, it is necessary to share it.
Ms. Clare Short (Birmingham, Ladywood) : Will my right hon. and learned Friend give way?
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