House of Commons Hansard Debates for 25 Mar 1993

Mr. Andrew Smith (Oxford, East) : I wish to follow up a point made earlier by my hon. Friend the Member for Newham, North-East (Mr. Leighton). I accept that the nature of the obligation is different for the 10 than for the two, but there are obligations on the two in the sense that if the United Kingdom wished to move to the third stage, we would, by a certain date under the provisions of the protocol and the treaty, have had to have done certain things. I put to the Minister the example of the protocol and convergence criteria which would require member states to have been in the narrow band of the ERM without severe tensions for two years. Is it not a fact that if we were to move at the earliest opportunity to stage 3--that is, by the first examination--we would have had by 31 December 1996 to have been for two years in the narrow band of the ERM, so that we would have had to have taken the decision to enter the ERM by 31 December 1994?

Mr. Dorrell : It depends on the date on which stage 3 comes into force, and there is not a fixed date in the treaty. To satisfy the convergence criteria, one must have achieved the objectives for a given time before the point is reached at which one joins stage 3. So the answer to the hon. Gentleman's question is that it depends on the date on which stage 3 comes into effect, and there is no fixed date in the protocol which commits us to reach a conclusion on our opportunity to change our mind.

Several hon. Members rose --

Mr. Dorrell : I will not give way again. I have permitted many interruptions, and I am anxious to conclude my remarks. [Interruption.] I recall promising to give way to the hon. Member for Birmingham, Selly Oak (Dr. Jones).

Dr. Lynne Jones : I think the Minister accepts that we are obliged to try to meet the convergence criteria, whether or not we decide to go on to stage 3. That implies that we should be joining the ERM or at least pegging the pound to the ecu.

Mr. Dorrell : I do not accept that. I made it clear that I regard the protocol as giving this country a clear choice, on the terms set out in the protocol, whether to join the single currency at a date of our own choosing. The opportunity for this country is that, under the terms of the treaty, we have the opportunity to influence the nature of the single currency. That is the main chance negotiated by the Prime Minister at Maastricht which I am keen for this country to safeguard.

Mr. Cash : On a point of order, Mr. Lofthouse. The Minister makes certain allegations about the date on which the single currency comes into effect. Under the protocol which is adjacent to our opt-out, it is clear that it comes into effect on 1 January 1999. We cannot veto it, and it is irrevocable and irreversible, so--

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The First Deputy Chairman : Order. That is in no sense a point of order for the Chair, and the hon. Member knows it.

Mr. Andrew Smith : It is over 25 hours since we began debating the economic groups of amendments. I have said before that it is appalling that, on issues of such importance, we are forced by a combination of the Government's preference and a deal done by the Government with the Liberal Democrats to discuss the issues in a condensed way when hon. Members are tired and we do not have a full opportunity to explore many important matters. Whatever view hon. Members take of the treaty or the Bill, this is a disgraceful way in which to handle such important matters.

I need not detain the Committee for long, not least because much of the territory of the debate overlaps the discussion of earlier groups of amendments. My right hon. Friend the Member for Llanelli (Mr. Davies) took us on a prolonged, perceptive and entertaining tour of the transitional provisions and the protocol of the European Monetary Institute. So entertaining was he that, despite the hour, we were disappointed when, in midstream, he leapt from article 8 to article 23 of the protocol.

My right hon. Friend made great play of the Financial Secretary's description of the Red Book as a set of multi-annual programmes. That was an apposite phrase, considering that this year we have had a multi-annual Budget containing multi-annual tax increases, providing for increases this year, next year and the year after that. A consistent theme throughout my right hon. Friend's speech dealt with a question which the Government have refused to answer--whether they propose to take the steps necessary to move towards stage 3 of economic and monetary union. When, if at all, do they intend to take that decision? I had hoped that the Financial Secretary would give at least a hint of an answer.

Nor could the Financial Secretary give more clarification of the position of the poor old Governor of the Bank of England under article 8 of the protocol on the European Monetary Institute. He left us with the curious understanding that each of the governors could take instructions from their member states as individual members of the Council, but that none of them could take instructions in their collective capacity as members of the Council.

That was unconvincing and was typical of those whom my right hon. Friend the Member for Llanelli called the Januses on the Government Benches. The measure means either that the governor can be instructed or he cannot. To imagine the capacity in which he can be instructed as a member of the Council is fanciful beyond credibility.

Mr. Leighton : I got the impression from the Minister's response that he is rather agnostic about what we are debating. Does my hon. Friend support the convergence criteria? Does he think that they make sense, considering that they are all monetary in form? They are not concerned with real convergence in terms of growth, output and employment.

Mr. Andrew Smith : I made it very clear in responding to the previous debates that, taking all these criteria together, considerable reinterpretation and reapplication of the criteria is necessary and I intend to develop this point further towards the end of my contribution.

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Mr. Austin Mitchell : I am grateful to my hon. Friend because he is generous in giving way, but we are eager on these Benches to know how many basic Labour party principles are going to be chucked away in our enthusiasm for this monstrosity of Maastricht. Would we as a Labour Government, if we were in power, or do we as a Labour party in Opposition, want to invoke the protocol, or do we want to move straight away with the others, as opportunity allows, to stage 3 and to full monetary union?

Mr. Smith : I can best answer that by citing the policy approved by the Labour party conference, which is :

"Conference believes that the Maastricht treaty, while not perfect, is the best agreement that can currently be achieved."

That is the basis of our policy and of our approach. I have been through on a number of occasions, and I will return to it later in my speech, the particular importance that we attach to the provisions of article 2a and the goals of high employment and social protection. 7 pm

Mr. Hain : My hon. Friend has laid great stress--and he has done so with considerable coherence--on the need for flexibility in interpreting the targets, convergence criteria and so forth. Does he apply the same flexibility to that Labour party motion?

Mr. Smith : I do not, because all of us are lectured on the Labour party manifesto and, as members of the party, it is incumbent on us to take very seriously the policy passed by our party, especially something, I might add, that was passed by such an overwhelming majority.

Ms Diane Abbott (Hackney, North and Stoke Newington) : All of us sitting behind my hon. Friend are impressed with his reverence for party conference decisions--

Mrs. Gwyneth Dunwoody (Crewe and Nantwich) : And we will remind him of it.

Ms Abbott : --but does he agree that when conference passed that resolution the text of the treaty was not before it?

Mr. Smith : I think that hon. Members knew full well what they were voting for when they voted for that resolution. [Interruption.] It is not as though arguments within our party, as well as among the public at large, on many of these issues have not continued for some time. I have great confidence and trust in the good sense of ordinary Labour party members when they vote for resolutions at conference. Mr. Ken Livingstone (Brent, East) rose --

Mr. Smith : I would like to make some progress with my contribution.

I agreed strongly with the points made in the excellent speech of my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts), a speech which was all the more impressive as its quality betrayed no hint that he had been here all night, waiting to make it. The core of his argument was that Britain will be better able to take effective action for sustainable growth, for jobs, for investment and for environmental protection if we do so within the framework of Maastricht than if we attempt to do so outside it. That is the crucial choice.

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Of course there are many things in the Maastricht treaty that we do not like. Of course many of these criteria must be subjected to further interpretation. Of course the whole question of the pace of progress towards economic and monetary union must be carefully examined. But, when it comes down to it, the choice is whether we are better off and can better serve the people of this country in moving towards the goals to which we all aspire by being part of the Maastricht process or whether we should turn our faces against it. Like my hon. Friend the Member for Attercliffe, I believe that we would better serve the people by being part of Maastricht. My hon. Friend the Member for Attercliffe also rightly pointed out that the Government were directly responsible for many of the weaknesses in the treaty which have been the subject of debate in this group, not least because the Government squandered a great deal of negotiating capital, for example, on securing the wholly damaging opt-out from the social chapter which we on the Opposition Benches are determined to continue to seek to reverse.

Let me turn to our Front-Bench amendments in this group, which have not been a focus of the debate so far. They are important and I want to stress them. Amendment No. 35 would ensure that in the event of the United Kingdom satisfying the necessary economic convergence conditions and other member states deciding to move to stage 3, Parliament would have an automatic opportunity to decide whether this country should proceed to stage 3 and full economic and monetary union. We regard that as a very important amendment and wish to press it to a vote.

As the treaty and the Bill stand, it will be up to the Government to decide whether to propose to move to stage 3. It is left open to them simply to choose not to do so if they so wish. In this way, Parliament could be excluded from a decision which would or could consign the United Kingdom to the second division in Europe. It is surely right, whether or not the Government wish to proceed to stage 3, that the House should have the opportunity to express its view on this decision. That is why we regard the amendment as so important. Amendment No. 420 is also important in seeking to strengthen and clarify the role of the European Council of Finance Ministers, ECOFIN, in the formulation of economic policy. I do not intend to go over all the arguments and discussions that we had in the night on the importance of ECOFIN. This amendment seeks to ensure that the Government do everything possible to see that the economic objectives of article 2, for which ECOFIN has responsibility under articles 102a and 103, are fully realised.

Should the amendment be carried, the Government would have to inform Parliament of their contribution to ECOFIN in the co-ordination of economic policy and in the achievement of a high level of employment and social protection provided for in article 2, as well as reporting on the work of the European Monetary Institute in preparation for economic and monetary union.

These matters are important. We have argued all along that the overall responsibility for economic policy must remain with elected Ministers, accountable to the European Parliament and to their own national Governments and Parliaments. ECOFIN must become an effective political counterpart to the European central bank. I therefore strongly urge the Committee to support that amendment.

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Mr. Marlow : The hon. Gentleman said a few minutes ago that some of the provisions of the treaty needed amending. He has now made a suggestion. He says that ECOFIN must have political control. How will he secure those amendments to the treaty? How will he ensure that ECOFIN gets economic control? These are very detailed provisions in the treaty. How confident is he that, once the treaty is ratified and becomes the bible of the Commission and the European system of central banks, he will be able to get any change out of it? And if he cannot get any change out of it, why does he take it on trust and vote for it now?

Mr. Smith : These amendments do not seek to amend the treaty. They seek to amend the Bill and therefore to determine how the Government--this Government or a future one--should behave in operating the provisions of the treaty, and that is very important indeed, just as, for example, in the previous group, the effect of new clause 56 would have conditioned the information that the United Kingdom supplied to the Commission for the purposes of the evaluation of our compliance or otherwise with the excess deficit procedure. These are not trivial matters: they are important matters both of substance and of signalling the way in which we on the Opposition Benches believe that the treaty might be implemented so as to serve the best 16interests of the British people as well as of the people of the rest of Europe.

Mr. Cash : I am sure that the hon. Gentleman is going in the right direction in trying to improve political accountability ; for heaven's sake, Conservative Members regard that as probably the most important central question. We do not want our monetary affairs to be taken over by unelected, unaccountable bankers, but that is what will happen, and that is what the Government are allowing.

Nevertheless, what the hon. Gentleman has just said does not solve the problem. He must bear in mind the fact that the treaty itself has been implemented in European law and that that basis will determine the manner in which it is implemented in the United Kingdom under section 2 of the European Communities Act 1972. I am afraid that the hon. Gentleman is putting the cart before the horse. He has fallen into a trap and his argument has collapsed. He is saying, "We would like to have a system in the United Kingdom that would enable us to implement what we wanted."

Unfortunately, when the matter gets to the House of Lords and, subsequently, to the European Court of Justice, the hon. Gentleman will find that he has been caught and will have to do what the European Community has already decided by treaty. That is the problem that the hon. Gentleman is up against--although I entirely agree with the direction in which he is moving.

Mr. Smith : If the hon. Gentleman agrees with the direction in which the amendments are going--even if he does not accept the reason for which they were tabled--I suggest that the best way of expressing that view is to vote for them. In his lengthy intervention, however, I detected signs of what we already know : that he is absolutely opposed to the way in which the European Economic Community, and subsequently the European Community, has developed. The hon. Gentleman makes no secret of the fact that he objects to the idea of a more closely integrated European Community.

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Mr. Cash : The hon. Gentleman cannot get away with that. I have always wanted the European Community to work effectively : indeed, the Foreign Secretary invited me to write a paper on the future of Europe for the Conservative manifesto committee. In that paper, I said that I wanted the Community to work--and, moreover, I voted for the Single European Act. I will not allow the hon. Gentleman to get away with the suggestion that I do not want the European Community to work simply because I do not want this crazy treaty, which will make Europe dissolve and implode.

Mr. Smith : If the hon. Gentleman wrote the part of the Conservative party manifesto that dealt with this issue, he clearly made a bigger hash of it than those who drafted the original Maastricht treaty, given the consequent division and confusion in Conservative policy on such matters. [Interruption.]

The Second Deputy Chairman of Ways and Means (Dame Janet Fookes) : Order. We cannot have seated interventions criss-crossing ; it makes for confusion.

Mr. Smith : Thank you, Dame Janet.

Let me return to the amendments and new clauses that we wish to press to a vote. New clause 56 aims to ensure that the Government are accountable to Parliament in their fulfulment of the criteria for economic and monetary union. It would require them to observe the need for proper programmes to achieve the objectives of article 2 as they pursue those criteria.

At the heart of the amendments and new clauses, and those in earlier groups, are the provisions of article 2, the bridge between stages 2 and 3 and the way in which those stages can be tied to article 2--which, after all, sets the European Community's task. Article 2 asks for

"sustainable and non-inflationary growth a high level of employment and of social protection, the raising of the standard of living and quality of life".

The Labour party believes that those aims are crucial to progress towards economic and monetary union. Through all the amendments and new clauses to which I have referred, we seek to tie the United Kingdom's interpretation of policy under the treaty more closely to the goals that I have quoted, so that there can be no doubt about the force for social and economic progress that we want our participation in the Community to realise.

7.15 pm

Mr. Legg : We have heard some excellent speeches, particularly that of the right hon. Member for Llanelli (Mr. Davies). He told us a good deal about stage 2, the obligations involved in it and the convergence criteria that we are required to follow. By covering so much of the ground, the right hon. Gentleman has made it much easier for me to make my speech.

Let me begin by addressing article 109j--which has been subject to some debate in the Committee--and article 109e. Article 109j sets out the stage 2 obligations for member states : they cover price stability, Government deficits and membership of the exchange rate mechanism. I commented during my intervention on the Financial Secretary's first speech that under stage 2 the United Kingdom has the same obligations as all other member states. Under the protocol, we have the possibility of exercising an opt-out during stage 3 so that we do not move to a single currency ; but that will not happen until

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stage 3. We may or may not exercise the opt -out. I contend that, until we do so, we shall be on a level playing field with all the other member states.

Yet again my hon. Friend the Financial Secretary has shown a positive attitude, suggesting that Britain wants to be at the heart of Europe and to play a full role in stage 2. The wish to ensure that Britain can influence developments that are happening at that time confirms my view that we are at one with the other 11 states in regard to stage 2.

I know that Ministers such as my hon. Friend the Financial Secretary--and, indeed, the Economic Secretary--often say that the criteria involved are admirable in themselves. Price stability? All Conservative Members agree that we want low inflation. Low Government deficits? Again, Conservative Members generally approve of that. The Committee must, however, accept the overall scheme of the treaty. In fact, the convergence obligations are secondary ; the primary obligation is economic and monetary union. We are going through the process of convergence so that we can take part in, and be a full member of, economic and monetary union. That is the rationale of the treaty.

Sir Trevor Skeet : The convergence obligation arises from article 2, but does not my hon. Friend agree that a number of subordinate obligations are involved--for instance, the obligation to return to the exchange rate mechanism at the earliest opportunity? Obviously, we cannot subscribe to the conditions in article 109j unless we are within that arrangement. Moreover, we must have an exchange rate obligation.

Mr. Legg : My hon. Friend has raised a number of interesting and vital points, with which I shall deal later.

Let me retun to our obligations in the treaty, including our obligation to achieve economic and monetary union. My hon. Friend the Financial Secretary claimed that the treaty made no major change in economic obligations ; he even suggested that member states should have foreseen all this when the treaty of Rome was signed 36 years ago today. Surely my hon. Friend the Financial Secretary is overstretching his argument.

Mr. Denzil Davies : I ask a question which perhaps I should have put to the Financial Secretary, who was arguing, apparently, that the conditions did not apply to the United Kingdom because there were conditions precedent, as it were, for those who wanted to enter stage 3. Has the hon. Gentleman noticed that the four criteria are described as criteria, and that to enter stage 3 it is necessary to fulfil the necessary conditions? Can he find anything that links the conditions to the criteria?

Mr. Legg : No, I cannot. The right hon. Gentleman makes an extremely good point.

Mr. Budgen : Will my hon. Friend give way?

Mr. Legg : I shall make a little progress and then I shall be pleased to give way to my hon. Friend.

In the Maastricht treaty we are seeing something quite different from that which was in the treaty of Rome. Article 2 of the treaty of Rome dealt with progressively approximating the economic policies of member states. That was loose terminology. We are now changing the objectives under article 2 to include that of economic and monetary union. It must be emphasised once again that

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the United Kingdom opt-out does not relate to economic and monetary union. Instead, it is a potential opt-out from stage 3, the single currency.

Mr. Budgen : My hon. Friend takes up the point made by my hon. Friend the Financial Secretary about our obligation under the treaty of Rome. When we first went into the treaty of Rome in 1972 we entered the snake, albeit for a short time. I think that it was for about two months. That was a preliminary attempt to get the United Kingdom into a fixed exchange rate mechanism. As the Committee knows, we came out of the snake. The danger that we now face is that many more legal pressures can be exerted upon us to re-enter the exchange rate mechanism.

Mr. Legg : My hon. Friend has made a valuable intervention. I shall speak about our membership of the exchange rate mechanism later in my speech.

All 12 member states are working towards the objective of economic and monetary union. Article 5 of the treaty of Rome puts obligations on member states to fulfil the tasks that are set out in articles 2 and 3 of the Maastricht treaty. The United Kingdom has an obligation under article 5 to facilitate the achievement of the Community's tasks, one of which is now economic and monetary union. It would seem that the other member states, possibly with the exception of Denmark, are keen to get on with economic and monetary union and do not wish to see one or two other members seeking to undermine their attempts to achieve that goal within the context of the treaty.

Furthermore, under article 5, the United Kingdom has an obligation to abstain from any measure that could jeopardise the achievement of the objectives of the treaty. That means that the United Kingdom must have the objective to abstain from taking actions in its economic, monetary and foreign exchange policies that could jeopardise the attainment of economic and monetary union which is being pursued by the other members of the Community.

Mr. Marlow : I draw my hon. Friend's attention to the speech made last night by my hon. Friend the Financial Secretary. We are, of course, committed to economic and monetary union, but that does not necessarily mean a single currency. There are other ways of achieving economic and monetary union. Perhaps my hon. Friend will tell the House what those other ways might be and what chance we might have of achieving or implementing them.

Mr. Legg : I ask my hon. Friend to be patient. I hope to deal with his point and others in a way that will ensure that they have the necessary cogency.

The Treasury has said that article 109m changes only slightly what is in the treaty of Rome. My hon. Friend the Financial Secretary did not follow that route this evening, and that may be significant. He followed it, however, in Committee on 14 January. When the Treasury submitted a memorandum on the ratification of the Maastricht treaty to the Select Committee on Treasury and Civil Service Affairs, it, too, referred to article 109m, and tried to argue that there was no effective change from our obligations under the treaty of Rome. I maintain that the common interest that is set out in article 109m is a stronger obligation than the common concern that existed under the treaty of Rome. Secondly, and even more importantly, when it comes to common

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interest, we must assess "common interest" and the meaning of it within the context and colouring of the Maastricht treaty. We find that common interest is clearly set out in the treaty, but what is it? It must be economic and monetary union. There is the obligation in article 109m that our exchange rate is treated as a matter of common interest to the other member states, with those states striving to achieve monetary union and wanting the United Kingdom to play its part in that process.

Mr. Cash : I much like my hon. Friend's style. He is taking us, with relentless but clear and cogent force, along the route of reality. I am sure that he will recall the protocol that is adjacent to the one that is supposed to be our opt-out. I am sure that he will agree with me that that makes irreversible and irrevocable that which is due to come into effect on 1 January 1999, come what may. Does he accept, like Chancellor Kohl, that there are those in the Community--most of them in the other member states-- who say yes to economic and monetary union, but go on to say that that carries with it political union? That is where the rub comes. We are being taken in that direction.

Mr. Legg : My hon. Friend has made a significant point. It is one that has been made to me by members of the Bundesbank council. They say that there must be a political union alongside monetary union. Chancellor Kohl has made his position clear. Those who go to the Library and consult the Financial Times of 4 January will see set out the Chancellor's commitment to political union and his recognition that monetary union will work only with political union. The United Kingdom's obligations in the context of the exchange rate mechanism are a source of concern to many of my hon. Friends. Article 109m is directly relevant in this respect. The other member states regard our exchange rate as a matter of common interest to them. I am sure that it will not have escaped the attention of Treasury Ministers that many of our Community partners have been somewhat startled and dismayed by Britain's exit from the ERM. A perusal of the press of the past six months since white Wednesday will elicit a range of comments by our European partners expressing this concern. The French Finance Minister, for instance, cannot understand why we are out and considers it necessary for us to return to the ERM. He cannot see how Britain can ratify the treaty and stay out of the mechanism.

7.30 pm

One does not have to be particularly sophisticated, reading between the lines, to understand the concerns of the Irish Finance Minister, Prime Minister, and Foreign Secretary, at the time of the Irish devaluation, about the financial problems that Ireland faced following Britain's exit from the ERM--especially in view of Ireland's close trading links with the United Kingdom.

Pedro Perez, Spain's Economic Minister, spoke even more forcefully on 23 October about Britain's exit from the ERM. He said that there could not be a single market without a single currency and that there could not be two systems in Europe--an exchange rate mechanism for some countries and a floating currency for others.

When Mr. Delors addressed the European Parliament, he made some trenchant remarks, without naming Britain, about countries that seek to devalue and thereby achieve

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a competitive advantage. We know, however, that many of our partners and members of the Commission are trying to play things fairly quietly at the moment, because ratification of the treaty is still in the balance.

Under the Maastricht treaty, member states that are unhappy with Britain's exchange rate policy will have the opportunity to do somethiong about that- -

Mr. Cash : The Chancellor of the Exchequer has arrived.

Mr. Legg : I am sure that he does not want to intervene, however, even though he probably has first-hand experience of some of the unhappiness felt by our partners and by Finance Ministers on the continent.

Mr. Marlow : Will my hon. Friend give way to the Chancellor if he will confirm to the Committee that, if we were to re-enter the exchange rate mechanism when article 109m is in force, we would, at a later stage-- if the economy demanded it--be able to leave again?

Mr. Legg : I thank my hon. Friend, but I must make some progress. It is certainly true that the treaty will provide the opportunity for our partners to press us, first informally and then more publicly, to return to the ERM. If Treasury Ministers resist that pressure, there are stronger powers in the treaty to compel Britain to return to the mechanism. The matter will not be solely in the hands of the Chancellor of the Exchequer during stage 2.

Mr. Iain Duncan-Smith (Chingford) : Listening carefully to my hon. Friend it occurs to me that we are in the midst of a dispute about the Government's position in respect of stage 3--a dispute between us and Ministers. Bearing in mind the comments of other member Governments so far, when stage 2 has arrived and stage 3 is imminent, who will be forced to decide on the interpretation of our position? It will surely not be our Ministers ; it will be the European Court of Justice that will be called to make the decision.

Mr. Legg : My hon. Friend makes one of his now customary interventions in which he puts his finger precisely on where we stand. The intervention will not be for Treasury Ministers or Members of Parliament. Ultimately, it will be for the European Court--

Mr. Bernard Jenkin (Colchester, North) : A political body.

Mr. Legg : I think that we have already explored that aspect. Certainly, the court will have the power to decide, but I suspect that we will not be taken to the court to compel us to return to the mechanism. The mere suggestion will be enough to ensure that Britain does so.

I believe that many Ministers, perhaps even the Chancellor himself, feel as stongly about membership of the ERM as I and many of my hon. Friends do. The experience of the British economy, of British business and of the British people in the ERM was damaging--[ Hon. Members-- : "Disastrous."] Many right hon. and hon. Members share that view--

The Second Deputy Chairman : Order. I remind the hon. Gentleman that he should be addressing me and that he should bear in mind the practical consideration that his voice will be heard better if he faces the microphones insted of turning away from them--a thought that may not have occurred to him.

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Mr. Legg : Thank you, Dame Janet, that is most helpful of you. I am afraid that I was distracted by some sedentary interventions. Under stage 2, many provisions of the treaty will bring us closer to other countries of the Community in terms of economic policy making. As many hon. Members have said, we will find that we have common economic policies. The Treasury issued a rather strange statement to the Select Committee on Treasury and Civil Service in November 1992. It was about the operation of article 103.1, which concerns the Council of Ministers geting together to devise common economic policies for Europe. The Treasury line on that has been that, if some of the policies or guidelines drawn up under the article are of a sort that Britain would not like--setting out a timetable for a return to the ERM, say, or guidance about budget deficits--the United Kingdom can somehow block them in the Council of Ministers. It can block and spoil the overall economic policy devised by the Council of Ministers. That does not seem to be very much like being at the heart of Europe.

I take seriously the comments from the Government Front Bench about wanting to be at the heart of Europe and wanting to exercise influence. I do not believe that Britain will adopt the role of blocker or spoiler in Europe in stage 2 and in the coming years. I believe that Britain will sit down at the table with its partners and accept the reality of the treaty, the obligations in the treaty, and that it will operate accordingly. Regrettably, I believe that that will be extremely damaging to the British economy.

My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) referred to previous experiments with fixed exchange rate regimes. To strengthen and legislate for this process, and to include in the supreme law of the European union the requirements to fix exchange rates must, in the current economic circumstances in Europe, be one of the most foolish and unwise economic decisions to be taken in Europe in the 20th century.

The statesmen of Europe, who do not recognise the economic changes in Germany, the costs of reunification, the implication of the borrowing requirement in the unified German state, and the effect that those factors have in transmitting their consequences to other member states through a fixed exchange rate, are playing fast and loose with the economic prosperity of the peoples of Europe. They are also threatening recession, unemployment and worse. The concept of the Maastricht treaty and its obligations are not an appropriate agenda or statutory framework that we should adopt in the mid or late-1990s.

Ministers have suggested that Britain might be able to continue to float its exchange rate during stage 3. Hon. Members should be aware that that idea is even more unlikely than the possibility that Britain can continue to float its exchange rate freely during stage 2. The idea that other member states like France, which had irrevocably fixed their currencies to the deutschmark, would then be content to see Britain floating its exchange rate and obtaining what they would consider to be unfair competitive advantages as a result is clearly inconceivable.

When we move to stage 3, and those other member states have irrevocably locked their currencies, they will expect the United Kingdom--if it decides to exercise the opt-out--to be playing a part in ensuring that monetary union is successful. They will certainly not be prepared to see Britain floating on the margins. I am sure that the

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requirements to return to the mechanism and to operate on the narrow bands of the exchange rate mechanism will be fully enforced. We must then face the reality of the opt-out in stage 3 with Britain locked in the narrow bands against the European ecu. Britain would have no representation on the governing council of the European central bank, which would set interest rates for the ecu, while Britain was tied to the ecu within a narrow band. The governing council of the European central bank would effectively set interest rates for Europe as a whole. Is my hon. Friend the Financial Secretary really offering us that tonight as an attractive proposition resulting from the opt-out?

Mr. Cash : Does my hon. Friend recall that in the middle of the night I produced a document which had been leaked to me? That document stated quite explicitly that advice was being tendered, apparently to Ministers, after white Wednesday on 23 September last year, which clearly stated that the conclusion was that sterling should go into the narrow band. Does not my hon. Friend find that a very chilling observation?

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