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Question again proposed, That the amendment be made.10.15 pm
Mr. Radice : Before I was so rudely interrupted, I was making the case for the European central bank, and I was saying that there is a strong argument for independent operation. I felt that the Bundesbank was a very effective model because, although it was operationally independent, it worked within an overall economic policy which was laid down by politicians. I argued that we should support the idea of a European central bank because, if we wanted a single market, we had to have a single currency, and if we had a single currency we would need a single monetary authority. I argued that there was a case for having an independent central bank, and in this I argued against my hon. Friend the Member for Kingswood (Dr. Berry), who said that it was anti-democratic. I said that it was not necessarily anti-democratic to have an independent body set up by statute which was accountable, through reports, to the European Parliament and also to the European Council.
It is true that we cannot be certain that we will achieve economic and monetary union or that we will have a European central bank. It is quite possible that conditions in Europe will be so difficult that we will be unable to achieve economic and monetary union. It is possible that we shall enter an era of competitive devaluations. I know that some of my hon. Friends think that the great thing about economic policy is that one should devalue, and then devalue again, and then devalue again.
Mr. Austin Mitchell : My hon. Friend should not attribute such asinine views to his hon. Friends. One should devalue when a currency is uncompetitive. The test of a competitive currency is when one can balance trading accounts in conditions of full employment and high, and sustainable, growth.
Mr. Radice : As it happens, I agree. As my hon. Friend knows, I thought that we entered the exchange rate mechanism at too high a rate, and I said so at the time. We were overvalued, and I was in favour of devaluation. However, there is a danger that, if one spends one's time talking about devaluation for one's currency, other countries will want to devalue too, which will set up a structure of competitive devaluations as countries devalue against each other. That is the danger now, and once that happens it will start to undermine the single market.
In Europe there is a strong move towards protectionism by many people, and there is a danger that the single market will be undermined and that there will be protectionism. Competitive devaluations and protectionism will result in the sort of dangerous nationalism that we had in the 1930s.
A dangerous scenario is opening up before us, and there is therefore a strong case for a single market, a single currency, a single monetary authority and a single European bank. If we do not achieve those, the forces of disruption and division will triumph in Europe and it will be a loss for all the peoples of Europe. If that happens, it will be to the cost of the people of Britain and of my constituency.
If European monetary union goes ahead, the United Kingdom must be part of it, as it would be disastrous if we were left out. The Government's opt-out policy is dangerous, and it was devised for internal party reasons to
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make Maastricht more palatable to the Tory party--it has not succeeded. That policy has meant that we are no longer taken seriously as a potential member of economic and monetary union, and it certainly writes us out of any prospect of geting the European central bank, or any of the European institutions, in the City of London, which will be a great loss for us.Mr. Tim Rathbone (Lewes) : Does the hon. Gentleman accept that, since the treaty was struck, more opinon in Europe has come round to the British point of view that a single currency is unlikely to be achieved within the original timetable ?
Mr. Radice : I have just visited a number of European countries with the Treasury Select Committee, and that is not the case. All the other countries are committed to the single currency--even Germany, which several Conservative Members have quoted as possibly being concerned about the currency. That is not surprising, as the Germans have the most to lose. The deutschmark is the strongest currency in Europe and the German central bank runs monetary policy. If the single currency and the European central bank are created, the show will no longer be German-dominated as it is now, but even the Germans support the principle of a single currency. All they are saying is that it must go ahead on present conditions, as they do not want the European central bank to be watered down ; nor do they want countries to come in to EMU if they are incapable of being in it, which seems quite sensible.
It may be right to say that, in the event, EMU will not go ahead. We cannot read the future. I am saying simply that the alternative scenario is not a good one. Competitive devaluation and protectionism, with the single market bust open, is a very worrying prospect for all of us. People's concern about that matter is one of the driving forces behind economic and monetary union. If we are really at the heart of Europe, we should be in favour of the principle of economic and monetary union. If it eventually goes ahead, we ought to be part of it.
Sir Teddy Taylor : I wish that the hon. Member for Durham, North (Mr. Radice) could have spent a few moments in the Dining Room, where this matter was being discussed. He seems to think that Europe is a daydream land in which all the problems of the world and the nations will be solved by transferring all power and responsibility to central bodies. I wish that the hon. Gentleman could have met organisers from the port of Larne, Northern Ireland, who make the simple point that, as a result of what we are doing, competitor ports in the Republic of Ireland will receive grants of 85 per cent. to build exciting new facilities, which will achieve nothing but will steal business from Larne. The hon. Gentleman's notion that cohesion funds and structural funds will solve the problems of Europe is delusion. Things will not happen that way.
The main amendment in this group concerns article 107. The delightful Treasury Minister on the Front Bench, my hon. Friend the Financial Secretary to the Treasury, will be able to give a very speedy answer : that anyone looking at page 115 will see that article 107 does not, in the meantime, apply to the United Kingdom. On the other hand, associated with this amendment is the whole
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structure of what the treaty is about. In no sense is it about the harmonisation of exchange rate policies ; it is about the abolition of the rights of people. What my hon. Friends should realise, even at this late hour, is that if the treaty is approved, they will have to ask themselves what on earth they are to say to the voters at the next election.If the people are unhappy about what the central bank is doing, if they feel that its policies are creating unemployment, what will they be able to do? At present, if they are unhappy with policies, they can vote another party into office. If they are unhappy about policies in the course of a Government's term of office, they can give a warning by voting for Opposition candidates in by-elections. But when all economic policy and decisions are transferred to central constitutions that are wholly outwith the control of elected bodies, the power of the people will have been completely and utterly destroyed.
I hope that, even at this late hour, hon. Members will think seriously about what they are doing to their democracy. They are removing completely people's power to express an opinion. They are taking away people's ability to express a view. Thus, if people are unhappy about what is happening, if they feel that something is wrong and unfair, if they feel that something damaging to the economy is being done, their only means of registering opposition will be to march, demonstrate and, basically, go about destroying the democracy that we have set out to achieve.
It must be appreciated that this was not always the view of Her Majesty's Government. I listen very carefully to what our excellent Prime Minister says. On 1 July 1991, in response to a question from the Leader of the Opposition, he said :
"We have made our position clear about a European central bank. If that comes about, it is many years away and it would certainly need to be accountable to a directly elected body."--[ Official Report, 1 July 1991 ; Vol. 194, c. 25.]
The argument that we are putting forward is that it is wrong in principle to have a European central bank without any type of people's control or any mechanism for the expression of people's views. I realise that some of my hon. Friends feel that they should go into the Lobby in support of the Government because that is the right thing to do, but they should realise that we are making decisions about something far more important than the future of the Government or of the Conservative party.
We are deciding whether people should still have control over the issues in our country and whether they should still be able to warn Governments at election time. If the central bank is established and assumes all the power envisaged, and the central institutions are effectively running all the economies, basically our democracy will be dead. People should appreciate what is happening. I do not believe that people appreciate the extent to which power has already gone and our democracy has disappeared.
10.30 pm
I received a delightful letter from the Prime Minister, who has always shown great courtesy and kindness in his dealings with people who support or oppose his policies. The letter was on a small issue relating to the Sikh community of Britain. They are probably the most law-abiding and decent bunch in our community. Those good and hard-working people faced a terrible problem. In
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British law we have exempted them from having to wear helmets when riding motor cycles or working on building sites.A European directive has been introduced which obliges them to wear helmets in other places such as engineering works. The British Government tried hard, on a majority vote issue, to obtain an exemption for the Sikhs. Sadly, our Government were out-voted. I wrote to the Prime Minister asking him whether--in the light of subsidiarity--he could ask the Commission to exempt the Sikhs. The answer that the Prime Minister sent to me was one of the most dreadful letters that I have received. The Prime Minister was courteous and kindly, as he always is, but he said :
"We tried very hard, but without success, to obtain a derogation Raising the issue again, now the Directive is in force, could well put the existing exemption at risk."
The Prime Minister of a democratically elected country said that he dare not even approach the Commission because, if he did, the provisions that have been made for the Sikh community would disappear. That does not show the lack of concern of our delightful Prime Minister for the Sikh community of Britain. I am sure that he cares about them deeply--we saw that in the way in which he tried o fight their case. However, the Prime Minister was saying that he dare not even ask the non-elected Commission, because, if he did, the right of the Sikhs to wear their turbans on motor bikes and building sites could be at risk.
The appalling TUPE regulations will effectively destroy privatisation in Britain--a controversial issue in this country today. Those regulations were part of the acquired rights directive which was passed in 1977 ; they were implemented by law in 1981 with what the British Government believed to be the law of the land. They said, "This is the law--it applies to commercial undertakings." Due to infraction proceedings taken by the European Commission--an unelected body--we now find that the law will apply to all sorts of privatisations and takeovers. It means that not only will future privatisations be difficult to achieve, but every British employer who has participated in a privatisation-- [Interruption.] I see that my hon. Friend the Member for Leeds, North-West (Dr. Hampson) is shaking his head, but it happens to be true
The Chairman : Order. I am having difficulty relating the hon. Gentleman's remarks to central banking. Perhaps he can help me.
Sir Teddy Taylor : I was referring to the issue as an example of the way in which our powers to influence matters have already disappeared. I was mentioning the matter briefly, not as part of my main argument. Something significant is happening to the powers of people and Parliament.
If we are concerned about the Sikhs--as we all are--there is nothing that we dare do. If we are concerned about the TUPE regulations, there is nothing that we can do. If we go ahead with the European central bank, there is nothing that we can do about basic economic policy or, more importantly, that the people can do with their votes.
Some people laugh and say, "What does it matter? Get the clever people to run things and don't give the power to the people." That is the sort of argument that people use against a referendum, when they say, "Don't let the people
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decide--they don't know about it." When people's power is destroyed in any country, something very important is destroyed--the basis of a peaceful community.Mr. Randall : The hon. Gentleman suggests that all decisions will be taken by the central bank. Does he agree that Ministers who are accountable to this Parliament will have a major influence on ECOFIN? Surely it is exaggerating to suggest that all powers--the hon. Gentleman used the word "all" several times--will reside with the central bank.
Sir Teddy Taylor : I am afraid that the hon. Gentleman is wrong. He is a conscientious attender at our debates and sincerely believes in Europe. I appeal to him to look at the duties of the central bank and at the powers that are being given to the various financial institutions such as the EMI and others. If he does that, he will see that, no matter what views or opinions are expressed, the basic policy must still be followed. I shall give an example from new clause 1--a suggestion by the Labour party that there should be an annual report to Parliament about what central banks are doing. If that new clause is accepted and we pass a resolution that the central bank follows mad, stupid and irresponsible policies, it will have no effect of any sort, because the central bank has a legal obligation to follow the basic policies set out in the treaty. Some people say that it will not work out like that, but the treaty obliges all institutions to act in that way.
The second point that I hope hon. Members will appreciate is that, before we accept the idea that a central bank should be set up to solve all the problems and achieve low inflation--although in fairness any fool can achieve low inflation by creating 3 million unemployed--we should look at the examples of the recent miracle cures offered by the EEC.
I shall not refer in detail to the miracle cure for agriculture which was to give a fair deal to our farmers and consumers--the common agricultural policy. Despite the years in operation and all the reforms, we are now in the crazy situation where mountains of food and expenditure on the CAP are higher than they have ever been and the people are paying more than ever for their food compared with world prices. The system is a shambles and a nightmare and is not working. The same argument applies to the ERM, which is closely linked because, unfortunately, we are obliged to try to move back to fixed exchange rates when the treaty comes into force.
Dr. Norman A. Godman (Greenock and Port Glasgow) : I am grateful to the hon. Gentleman for showing his characteristic courtesy in giving way. He spoke about his correspondence with the Prime Minister. Has the hon. Gentleman at any time raised with the Prime Minister the likely location of the bank? Is the hon. Gentleman confident that it will be located in London with various agencies and functions carried out from a site in Edinburgh?
Sir Teddy Taylor : I have not raised that issue. When one opposes the establishment of a central bank, it is a bit devious to say, "I want it in my constituency or in London or Edinburgh." When one holds the view that the principle of a central bank that is based on policies of fixed exchange
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rates is bad, it would be dishonest to suggest a location for it. I am sure that many hon. Members will suggest excellent places for the bank.Mr. Geoffrey Dickens (Littleborough and Saddleworth) : How does the ballot box affect banking? If one banks with the Hong Kong and Shanghai bank, the Bundesbank or Barclays, one is not affected by the result of a general election. Hundreds of thousands of companies in this country have to rely on the good will of banks, often to keep them afloat. My hon. Friend grossly exaggerates and clearly does not understand banking.
Sir Teddy Taylor : My hon. Friend and his colleagues voted for this wonderful new arrangement called the ERM on the basis that it would bring growth and stability. I know that, as a splendid and respectable person, my hon. Friend did that with sincerity--not because he was told to do so by the Whips but because he knew it was the right idea. I appeal to him to think of the unemployed. Think of the people whose houses are being repossessed as a direct result of a policy that is economic lunacy.
Dr. Keith Hampson (Leeds, North-West) : That is not the fault of the exchange rate mechanism.
Sir Teddy Taylor : My hon. Friend says that is not the fault of the ERM. We know that the British people are having to pay a huge amount of extra cash in taxation
The Chairman : Order. The hon. Gentleman has assiduously attended the Committee, but his remarks have little to do with the issue of a central bank. Will he please address the amendments?
Sir Teddy Taylor : Certainly, Mr. Morris. Once a central bank is established, we shall be obliged to return to the ERM and fixed exchange rates. The whole principle behind the central bank is monetary union based on fixed exchange rates. That will again create unemployment and misery, because if one tries to pretend that something is not its worth, one has to distort other factors.
Mr. Bill Walker (Tayside, North) : My hon. Friend, as a fellow Scot, will recognise that the United Kingdom's central bank is the Bank of England. He may care to inform my hon. Friend the Member for Littleborough and Saddleworth (Mr. Dickens) that the Royal Bank of Scotland, the Bank of Scotland, the Clydesdale bank and all the other banks in Scotland have no say in interest rates, because they are set centrally by the Bank of England.
Sir Teddy Taylor : My hon. Friend is absolutely right. The argument is made that we are giving power to the people by obtaining exemption from stage 3. In fact, they will be in the same position as the people of Scotland, who have a Scottish pound note but no control over the United Kingdom's economic policy.
There is not the slightest evidence that passing over all economic power to a central bank will make matters better for the people of Britain. I have sat here treaty after treaty, night after night, debate after debate hearing about the wonderful ideas coming from the EEC that will solve problems and make life better. I wish that my hon. Friends--including those who are smiling, on the Front Bench below the Gangway--would look at Europe today. Do
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they see a growth in prosperity? Sadly, they see an area in structural decline and with mass unemployment. When countries such as America have steadily lowering unemployment rates, we should recognise that Europe is in structural decline. As a country stuck on the edge of that, ours would not benefit in any way.We have tried the common agricultural policy, the ERM and other Euro- policies. When people say that a central bank is the answer, we should tell them that, on the basis of all the evidence, we do not accept it.
No one has argued in the debate that a central bank is a great idea. The European debate has changed dramatically since 1972. There always used to be a bunch of true enthusiasts who said, "This is going to be good. This is going to be great for Britain." With the arrival of the Single European Act, a good number of people still genuinely thought that it would be good for Britain. I gain the impression that very few people--apart from the small number of fanatics that one always finds in both parties--really believe that Maastricht will do any good for this country or its people.
Mr. Marlow : Surely my hon. Friend knows what has been happening in the background and in the Lobby and that the Government have been saying, "It isn't going to happen. Don't worry--there isn't going to be any monetary union. This horrible edifice isn't going to be built." If that is the case, the contract, and the legal detail--if that is what we are being asked to pass--is it not wrong that we should consider something that is nonsense and then vote for it?
Sir Teddy Taylor : Yes. I will come to that point in a second. The Government say that if we do not give our approval, bad things will happen to Britain--that it will somehow be sidelined. We should ask ourselves whether it would make matters infinitely worse if we were prepared to say no to a central bank. Britain would be greatly strengthened. Time will tell. My hon. Friend is right to say that the arguments used now are, "Don't worry about a central bank or a single currency. It is not going to happen. It will all break down." Some people genuinely believe that.
Sir Teddy Taylor : They know, for example, that fixed exchange rates can never work in the long term. There is no way in which all the countries will develop equally. The argument is made by some--including my hon. Friend the Member for Harrow, East (Mr. Dykes)--that the problem will be solved by dumping vast amounts of money on areas that are not doing so well, to bring them all up to the same level of achievement and activity. If one looks around the world one sees that that is nonsense and does not work.
Mr. Marlow : My hon. Friend the Member for Harrow, East (Mr. Dykes) has just said, from a sedentary position, that he believes that it will go ahead. Does that reassure my hon. Friend?
Sir Teddy Taylor : My hon. Friend the Member for Harrow, East (Mr. Dykes), who has consistently supported the EC, probably does believe that. I ask him to look back at what has happened to our economy, our democracy and, above all, the powers of the people since we joined the Community. I believe that some people are
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supporting all this nonsense because they do not believe that it will happen, but some support it because they feel that we cannot act in any other way. Those people have lost hope and they have lost faith.10.45 pm
Even if some people think that we should go ahead with the central bank and the transfer of power to non-elected boards, councils and commissions, we have no right to do that without informing and consulting the public. It is shamefully wrong that we should push ahead a massive change in our democratic system without telling and consulting the people.
Mr. Derek Enright (Hemsworth) : I am grateful to the hon. Gentleman for giving way ; he always shows great courtesy in that regard. I have some sympathy with the hon. Gentleman's arguments about democratic control. I, too, am worried about what is happening to the police, hospitals and the education system. What worries me is that I can find precious little in the Bank of England that responds democratically to the worries of my constituents in Hemsworth. The position has been the same under successive Governments of both hues.
Sir Teddy Taylor : That is the whole point. The hon. Gentleman may believe that Conservative policy on the police is rubbish and takes away democracy ; that is a fair argument. He may believe that Conservative policies on education are terrible and undemocratic. He may feel that we are not using the controls of the Bank of England in the proper way. If he holds such views, however, he can go out there and fight, get people to vote for him and secure the return of a different Government who will approach things in a different way. The tragedy of the transfer of power to non-elected institutions--to boards, councils and commissions--is that, if the hon. Gentleman suddenly decides that those bodies are pursuing policies that are bad for employment and industry and dreadful for Britain, he will be able to do nothing.
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Mr. Enright : Will the hon. Gentleman explain how we elect the officials of the Bank of England?
Sir Teddy Taylor : As we know, the Governor of the Bank of England is appointed by the Government of the day and economic policy is determined by the Government. The present Government have pursued certain policies which they assure us will improve the economy and, of course, we hope that they are right ; but the point is that, if they are not, people can do something about it. There is something terribly dangerous and bad about the taking of all power of control from the people and the ripping out of democracy.
I ask my hon. Friends to think about this. If the Maastricht Bill goes through and a central bank is established, what on earth will they tell voters at the next election? We shall have some control over the council tax and the grammar schools ; we shall have some control over the amount of income tax within a global total of taxation, which will be subject to negotiation and determination on the part of non-elected bodies. Basically, however, the power of the people will go. I believe that the creation of a central bank and the monetary policies of the EC will create mass unemployment and misery and more protectionism ; I think that it will be horrible for all our people.
I may be wrong, but the crucial point is that, if we agree to the Bill, what we had will have gone for ever. We shall not be able to sit down suddenly and say, "Let us change all this : it is not working." Sadly, we know from our experience of the common agricultural policy that policies do not simply get changed, particularly when many countries feel that they are doing very well out of them and getting lots of money.
I hope that we shall use the amendment not to try to score party points, but to persuade ourselves that something huge, important and significant is happening to our democracy. We have no right to allow that unless we are convinced that it will benefit our people--or, more important, unless we have given the people a chance to decide for themselves.
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Mr. Shore : Like other hon. Members, I shall say something about the independence of the European central bank because it merits considerable discussion ; but, before I do, I wish to mention the concept of the central bank and a single currency. The two clearly go together : we shall not have a central bank unless we are to have a single currency.
I am wholly unconvinced about the case for a single currency, which is central to the whole argument. It would be a serious mistake if we were to allow ourselves to be absorbed into a single currency, partly because of the difficult issue of convergence. We have had debates about convergence, purely monetarist indicator convergence and what we sometimes call convergence in real economic aggregates. There is one particular difficulty about convergence. Let us suppose that, at one particular point in time, it could be arranged that all the countries which were potential or candidate members to join the single currency were all enjoying balance of payments equilibrium, full employment and other ideal circumstances. Even if it were possible at that moment to set up a single currency, it could not last. The conditions would change, and we all know the reasons. There is a dynamic working with different force and at a different speed in different parts of the vast area which would be formed in western Europe, and including the United Kingdom. The factors operating in different countries, and perhaps in different regions, are so clearly visible that the dream of a single currency looks like a nightmare when we start to consider the consequences of being locked into a single currency when there are differential rates of growth.
I did a simple calculation about relative movements in the growth of gross domestic product in the seven major economies of the western world. I took 1989 as 100 for all of them. By the end of this year, the estimates are as follows : France, which starts as 100 in 1989, reaches 107 by the end of 1993 ; Germany, which startes at 100, ends at 111 ; Japan, which also starts at 100, ends at 114 ; but the United Kingdom, which started at 100 in 1989, will be 99 at the end of 1993. Within four years, there is a spread of rates of growth, ranging from 14 per cent. for Japan and minus 1 per cent. for Britain. That could be different at different times, or we may do much better.
However, if there were no means of adjusting the rate of exchange of the yen and the pound--if they were frozen together--the consequences for the pound and the United Kingdom would be very severe. Throughout the history of the world economy as it has developed, there have always been movements and adjustments between currencies. There must be, otherwise there would be no tolerable way of making adjustments other than accepting that in the areas that are doing less well than others there would be constantly rising unemployment, whereas in the areas of great prosperity there would be ever- increasing investment. There would be an ever-increasing movement of people from the depressed areas to the areas that were doing well.
We know all this from our experience in our own country over the years. In the past we have had to use powerful instruments of regional policy to correct the tendency. The alternative would have been to let the south of England drain the north, Scotland and a large part of Wales, and let people crowd into the south--as happened to a large extent in the inter-war years.
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If there is a single currency in Europe, inevitably there will be a differential rate of growth. We know where the strongest economy in the European Community is located--it is still in Germany, and when Germany has absorbed the former East Germany it will be the super-economy of the European continent. The effect of that on the United Kingdom and on other economies that are not as powerful, and are not growing as fast, will be as I have described. They will experience either rising unemployment or a substantial movement of their people and their investment to the areas of greatest growth.Mr. Dickens : Does the right hon. Gentleman agree that convergence would be well-nigh impossible? I do not believe that there is a snowball's chance in hell of there being a single currency. The difficulties are compounded by the fact that, with more countries coming into the European Community, the criteria will not allow for convergence so easily, and the numbers complicate things further. I do not believe that we would ever get into that situation. Even if we did, we should of course maintain the opt- out clause--but I do not believe that we would ever have to use it.
Mr. Shore : It would not be impossible for those events to happen-- although it would be foolish to allow them to happen. In discussing the amendments, we must assume that the option to enter a single currency has been exercised--otherwise the debate would be rather unreal. I agree that that involves a hypothesis, and there is still a big question mark over it. In 1996, or whenever the moment of choice arrived, would the Government opt for a single European currency? Would they want to? In view of some of the criteria for opting in, would they be able to? I do not want to develop that argument now, because it would lead us back into another debate, about the transition--but what I fear most is that the Government may make a serious effort to opt in, which would involve a calamitous squeeze on the British economy. We know the problems that our economy is facing now, and from the financial statement we know what the prospects are for the next four or five years.
The conclusion to which I am coming is familiar to others who have addressed the problem. There may be a single currency, but there will be differential rates of growth and of prosperity. Therefore, either there will be a disastrous situation in the less prosperous and less dynamic regions, or there will have to be an enormously powerful regional policy.
With the best will in the world, there is not the will within the EC for a powerful regional policy. I know that the optimists in the Opposition will say, "Over the years we shall try to develop regional policy and try to pretend that we really all are absolutely identical in our motives and our feelings about each other. We shall come to the conclusion that our feelings about Italy, Greece and so on are exactly the same as our feelings today about our fellow countrymen." That may be a worthy ideal, but it is not the reality. It is difficult enough to sustain a strong regional policy in this United Kingdom.
Mr. Austin Mitchell : Does my right hon. Friend accept not only that that is unlikely but that, if it happened, we
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would still be the second largest contributor unless the problem of redistribution was tackled so that contributions were measured in terms of ability to pay?11 pm
Mr. Shore : That is absolutely right. The whole question of the criteria governing existing regional policy would need to be looked at and, indeed, changed, because that policy is built on objective 1 areas, which are receiving or will receive substantial assistance. Other areas of great need and rapid industrial change get very little regional assistance, and that assistance is not likely to increase. I have made my point about the difficulty of sustaining a powerful regional policy within a single country. The difficulty of operating a really serious regional policy covering the whole of the half-continent of western Europe will be very much greater. The only person ever to make a serious study of the problem was Sir Donald MacDougall, a most distinguished economist, who was chief economic adviser to the CBI and, before that, director-general of the Department of Economic Affairs. Donald concluded that one would need a shift of resources equal to 7 per cent. of the Community's GDP. The total European budget is about 1.2 per cent. and the regional fund accounts for about 15 per cent. of that sum. So we are talking about a sum 30, 40 or 50 times greater than what is now available in the enhanced structural funds that have existed since the European Single Act was passed.
The truth is that the enhancement of those funds was to take account of the introduction of a single European market. There has been no enhancement, and no proposal for the enhancement, of regional and structural funds to take account of the progress towards a single currency.
Mr. Shore : I accept that, but that was part of the whole package to get four particular countries, which were rather like client states, to take a favourable view. [Interruption.] I invite hon. Members to turn their mind to the meeting in Edinburgh and what Mr. Felipe Gonzalez was trying to achieve. Having established in principle the idea of a fund, he wanted a great deal for Spain--and he got it. The Spanish side of the bargain was, "If we don't get this, we will not give our approval."
Mr. Hoon : My right hon. Friend always advances a very logical argument. He talked about differential rates of growth. There are already differential rates of growth in each nation state--for example, the London area grows faster than the regions. That partly explains why unemployment is higher in the regions than has historically been the case in the capital city. The right hon. Gentleman would not, for one moment, blame that on the fact that the United Kingdom, like every other member state, has a single currency.
If I followed my right hon. Friend correctly, part of the justification of his argument was that such matters turn upon balance of payment flows and on the deficits created where some countries are growing faster than others. If there were a single currency, there would not be any purpose in calculating balance of payments deficits. We do not calculate the balance of payments deficit as between London and the north. We make no careful calculation of the movement of goods. My concern about my right hon. Friend's impeccably logical analysis is that it operates
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from the existing system and presupposes that the position would not be significantly different after the introduction of a single currency.Mr. Shore : That is an interesting point. My hon. Friend is quite correct in saying that the balance of payments problem, which reflects inbalances of economic performance, would not be visible in a single currency. But the underlying consequences would be the same. Unless there was a correction of some kind--an increase in resources put in--there would be an increase in unemployment in and a movement of people out of areas that were not doing well. We would lose, as it were, the danger signal of a balance of payments deficit. We would not be aware of the physical problems until a disastrous slump was upon us.
Mr. Bill Walker : For nearly 300 years, we in the United Kingdom have operated a single currency and a single bank. During periods of economic difficulty, the discontent and unhappiness felt by people in the regions soon made itself manifest to their parliamentary representatives. We have democratic control here, so we are able to act quickly in such circumstances.
A single currency and a single bank, with the absence of democratic accountability, is not the answer. The people of Britain can complain to, and about, us and there is the ability to change Governments, sometimes at relatively short notice. That represents a balancing factor, for at times we have moved people from poor to wealthy areas and have transferred vast amounts of taxpayers' money from wealthy to poor areas. We have been doing that for nearly 300 years, and the facts are there to be seen.
Mr. Shore : That raises the whole question of what is a community. We refer often to the European Community, but I am not sure that it is a community in the same sense that, for example, the United Kingdom is a community. We feel closer because they are our own people, and we are prepared to do more for them--as we are prepared to do more for our families--than we are prepared to do for others. That does not mean that we shall be pig-headedly obstinate or ungenerous in our dealings with others. On the contrary, I hope that we shall be very generous. But it is no good pretending that there is the same degree of commitment and sense of genuine community and union between the countries of Europe as there is within each country. We must bear that in mind, particularly when we are talking about the need to transfer major resources to compensate for the effects of a single currency.
Mr. Enright : Does my right hon. Friend recall some of the difficulties he had when Secretary of State for the Environment? For example, when I chaired the West Yorkshire planning and transportation committee, we had some negotiations with him. I remember the way in which I thought he and his colleagues conducted a very centralised administration. I did not realise how little centralised it was until the Conservatives took control. Even so, the response we got was carefully noted in the region.
I suggest that many of the disparities in the regions are recognised more as a result of what is happening in Europe now--because it is essentially a Europe of the regions--than as a result of what is happening in central
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Government. Much the same applies when we are in power, although slightly modified, or the Conservatives are in office.Mr. Shore : My hon. Friend gives a strange viewpoint. Perhaps it reflects past insensitivities. In an earlier ministerial experience, when Secretary of State for Economic Affairs, I was responsible for regional policy. We had a picture, a map, of the whole country showing the state of employment and unemployment and the future commitment of new work into every travel-to-work area throughout the United Kingdom. We put enormous resources into a powerful economic regional policy. In addition to the old development areas, we had special development areas and intermediate areas. Later, as Secretary of State for the Environment, I was involved in putting resources into the inner cities, which had been neglected for too long. We were able to do that because we had the knowledge, the information, the commitment and a sense of being one political community. We used the strength where we were strong to help weak areas in our country. That is natural ; it is what one expects. That is the real meaning of community. The European Community is a different sort of community.
Mr. Bowen Wells (Hertford and Stortford) : Would the right hon. Gentleman reflect on the experience of the United States, which created a single market among the states of America? The number of states increased over 100 years. A single currency among the states was not established until 100 years after the formation of a single market and the free movement of people. A single currency and a central federal bank were established because one currency became paramount--it became so strong that all the states decided that it would be better to have one currency and trade without the problems which resulted from the differential exchange rates among the states rather than continuously adjust them.
It seems that exactly the same process will take place in Europe because the deutschmark will become the common currency. With the common currency in the hands of the Germans, and with the Bundesbank under its present constitution--which involves currency stability only within the borders of German--we would have absolutely no say about or influence over monetary policy throughout Europe. Therefore, it is essential that we establish a central bank and a single currency which we can influence through democratic institutions.
The Chairman of Ways and Means (Mr. Michael Morris) : Order. This is a long intervention. The hon. Member's point has been made.
Mr. Shore : The comparison with the United States is not helpful to us. There are so many obviously special circumstances in the history of the United States that one cannot make an easy comparison between what happened there and what may happen in western Europe. A factor which we cannot leave out when we look at the United States is that it has a single Government, a single central bank and a single currency.
I know that some Labour Members long for such a fulfilment and development. However, that is not the line taken by those on the Labour Front Bench--not publicly,
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