House of Commons Hansard Debates for 19 Apr 1993

Mr. Budgen : Will the hon. Gentleman give way?

Mr. Leighton : I believe that the hon. Gentleman wants to help me, so I will give way.

Mr. Budgen : The hon. Gentleman should accept some reassurance from me. His party has stood on its head on a number of occasions, but my party has stood on the fence. At least his party has taken a view about the advantages and disadvantages of the single currency, but apparently it is impossible for the Government to decide what those might be--they leave open the possibility of either going in or not. It seems that even the experience of 16 September is not conclusive for the Government ; they need some other indication of what is to be in the national interest before they decide to adopt the single currency. It seems to be almost impossible to provide evidence that will enable the Government to make up their mind.

Mr. Leighton : The hon. Member for Wolverhampton, South-West (Mr. Budgen) referred to evidence, and he was right to do so as I have heard no explanation for the change in the Labour party's view. Mrs. Dunwoody rose--

Mr. Leighton : I do not want to keep giving way, but I shall give way to my hon. Friend as she played a leading part in Labour party councils on such matters. Therefore, I would be grateful to hear from her.

Mrs. Dunwoody : Does my hon. Friend accept that some of us no longer play a part in Labour party councils precisely because our views were clear cut and we asked questions that were found unacceptable by those who now propose to speak on behalf of the Labour party? I shall ask my hon. Friend a simple question : does not he find it

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deeply saddening that there has been no clear debate of the pros and cons of the movement towards the monetary system and monetary controls, either among the Labour party or the electorate? There has been a series of slippery smudges that have confused and misled, not only his constituents, but many of mine, irrespective of their political complexion. Is not that the saddest condemnation of Her Majesty's official Opposition?

Mr. Leight someone thought that it was a clever electoral move and a way to win votes. If that was the case, it was a mistake as we know from our private polls that at the last election there were two issues on which support for the Labour party was well behind that for the Conservative party. One of those issues was the economy and the other was Europe. Therefore, the policy did not help us.

I have searched through all the files that I have kept over the years for any justification or explanation of the change. I do not know whether my hon. Friend the Member for Oxford, East (Mr. Smith), who is having an interesting conversation with his colleague, published any articles of an intellectual nature to explain the changes. I have looked through my files and could find only one such article, which was published by my hon. Friend the Member for Islington, North, for whom I have great respect and affection. He is one of the Labour party's thinkers. In the Tribune newspaper on 10 November 1989 my hon. Friend said :

"No ifs or buts, it must be the ERM."

That is the only intellectual case for the policy that I can find. Perhaps my hon. Friends the Members for Blackburn (Mr. Straw) and for Oxford, East published arguments--I do not know.

My hon. Friend continued :

"We must have currency stability".

According to him, that was why we had to join the ERM. He said : "ERM participation removes currency speculation from the list of the immediate worries faced by the British Government--especially a Labour Government."

He continued, lyrically :

"Entry enables us to wrap the strength of other central banks of Europe around our currency to defend against speculation." The idea was that we would join the ERM, the pound would be put in an emergency ward and all the other central banks would wrap themselves around the currency so that we would have no more problems and speculation and would not have to worry about the pound. Mr. Dalyell rose --

Mr. Leighton : I shall give way to my hon. Friend, for whom I have great respect, when I have made my point.

Mr. Dalyell : It was not my hon. Friend the Member for Islington, North (Mr. Corbyn).

Mr. Leighton : I have made a mistake, so I shall give way.

Mr. Dalyell : My hon. Friend the Member for Islington, North is lyrical about many things, including rain forests, Cuba and Nicaragua, but I have not heard him being lyrical about the EC.

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Mr. Leighton : I am referring to my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith), for whom I have great respect and affection, who was a predecessor of my hon. Friend the Member for Oxford, East as an Opposition spokesman. I made a mistake with the constituency, for which I apologise.

In any case, my hon. Friend said :

"It means that the Government can concentrate on the crucial task of rebuilding the domestic economy without having to devote time, attention and energy to defending the pound."

So the ERM would take care of all the pound's problems. I know of no other intellectual justification besides this one of the view that we have adopted.

Referring to speculation, my hon. Friend said :

"ERM membership virtually removes that problem."

Mr. Richard Shepherd : I thought that I heard the hon. Gentleman say that the article was written in November last year, after the events of September. Have I got it wrong?

Mr. Leighton : The article appeared on 10 November 1989. On the day the policy was announced, 15 October 1990, I said--it is recorded in Hansard --

"I prophesy that he has it wrong and that the pound will not stay at DM2.95."--[ Official Report, 15 October 1990 ; Vol. 177, c. 936.] Exactly a year later, I said :

"It is always dangerous to prophesy, but I am prepared to do so and say that it will not be possible to hold the pound at DM2.95." I should have thought that those of us who got it right would be listened to now rather more carefully, but I do not think we will be. And those who got it wrong should apologise.

The ERM was a dummy run for the single currency ; it was a taster. When industry was crying out for lower interest rates, those rates were 4 per cent. higher than they needed to be, to try to defend the indefensible. They tipped the country into recession, in fact. The ERM made more than another 1 million people unemployed. Growth, employment and prosperity--all were subordinated to pegging the pound in the ERM.

Yet, after all the pain, all the suffering, all the lost jobs, all the houses repossessed, and all the businesses closed down, the policy failed and we were blown out of the ERM. The Government's policy collapsed in spectacular and cataclysmic failure, but not before they threw away the country's entire foreign exchange reserves. In short, the policy ended in ignominy and humiliation. It was not only the Government's policy that failed, however. Our policy failed, too. It was a bipartisan policy, and right up until the day before black Wednesday Labour party spokesmen were saying that there should be no realignment. So when the Government's entire economic policy collapsed, the Labour party derived no advantage from it because we had foolishly backed that policy.

The question is : have we learnt anything? It is doubtful that we have. It is difficult to know, because the people who supported the policy, who got it wrong, have not commented on its failure. They have remained silent, perhaps because of their embarrassment. If we support the treaty, and economic and monetary union, and a single currency, we must be willing to rejoin the ERM. In other words, we must be prepared to make the same mistake all over again. Why cannot we grasp the

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simple truth that exchange rates must reflect economic fundamentals? If economies diverge, as those in the Community are diverging, so will their currencies. A strong currency reflects a strong economy, not the other way around. We cannot achieve a strong currency by passing a resolution to that effect, or by artificially pegging it to a nominal exchange rate. The exchange rate is no more than the price of a currency compared with that of other currencies. If countries' economic performance or rates of inflation vary, so will the value of their currencies--their exchange rates. There have just been movements in the exchange rate between the Japanese yen and the American dollar. Problems arise if such movement is not allowed to take place, as we saw recently in east Germany. If country A links its currency to country B which has lower inflation and higher productivity, country A's currency will be continually overvalued and the currency of country B will be undervalued. A's exports become dearer, imports become cheaper, the balance of payments deficit grows, factory closures proceed apace, and there is unemployment. Countries can join a single currency mechanism only if there is real convergence, if their economies are working in the same way and have similar rates of growth, wealth, employment, investment, productivity and labour costs. The treaty does not mention real convergence. As it is a monetarist treaty, all its criteria are monetary. It talks about fiscal deficits and Government debt, rates of inflation and about joining the narrow band of the ERM. There is hardly a word in the treaty about employment.

11.30 pm

Mr. Winnick : There is some reference to employment, but it is so small that I can understand my hon. Friend not noticing it. Does he agree that there is a great contrast between the passing, slight reference to social harmony, employment and other matters and all the details in article 104C which sets out, section by section, the penalties that will be imposed on member states if they exceed the 3 per cent? Therefore, it is clear that the treaty is a recipe for higher unemployment and more deflation. The ERM will seem insignificant compared with the hardship and misery that will result if economic and monetary union is brought about.

Mr. Leighton : That is why the convergence criteria are outrageous to a party of the left. We are about to enter stage 2, which will require budget deficits of 3 per cent. and Government debts of 60 per cent. That will mean huge cuts in public expenditure throughout the Community. Maastricht means co-ordinated deflation, just when the opposite is needed. Officially, unemployment in the Community is over 11 per cent. The average in the Community is higher than in this country, but in real terms it is much higher. Next year there will be zero growth. The European Community is the world's unemployment blackspot and it will get worse because in stage 2 we will try to reach the convergence criteria.

As I say, there will be co-ordinated deflation. That will mean great upheavals and much suffering. It will destroy several Governments. It has already destroyed the Mitterrand Government. They had 10 years in which to show what a socialist Government could do, but they have been destroyed because they linked up with the ERM. The same thing will happen to the Spanish Government. Surely

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the level of Government deficit should be decided by the Government of the day according to the prevailing circumstances. It is ludicrous and arrogant to lay down Government deficits in an international treaty. I have heard of the end of history, but this is the end of economics because the subject cannot be discussed : it is laid out in a treaty.

Who wins elections will not matter very much. It will not matter whether it is the leader of the Conservative party or the leader of the Labour party because if the Bill is passed we will know what the economic policy is to be. We all know. The deficit must not be more than 3 per cent. The Government debt must not be more than 60 per cent. Inflation must be within 1.5 per cent. of the best, and interest rates within 2 per cent. of the best, and we must have successful membership of the narrow band of the ERM. That will be policy. It will not matter whether the right hon. Member for Huntingdon (Mr. Major) or my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) wins the election. It will not matter a damn, or a row of beans. This international treaty, which is legally enforceable, will lay down the policy.

Mr. Nicholas Winterton : We come back to the fundamental reason why so many hon. Members oppose the Maastricht treaty. It is because it is a treaty of federal union, despite protocols and opts-outs, which are untested. We are being led, step by step, with a light blindfold around our eyes, down the road to a federal Europe.

Mr. Leighton : The treaty means that, at the next general election, policy cannot be affected by voting. Our democracy will be devalued and undermined and politics will become redundant, pointless.

Mr. Winterton : What about politicians?

Mr. Leighton : The politicians in the House of Commons, who have been elected, will not be allowed to influence what is happening.

Mr. Wilkinson : Will the hon. Gentleman consider this point? Perhaps we are experiencing a foretaste of what he has warned us about for the future, in as much as we have a de facto coalition Government who, on the matter of European union, are driven by an extraordinary consensus on the line laid down in the Maastricht treaty, without any reference to the wishes of the electorate.

Mr. Leighton : I was taken, earlier this evening, to hear my hon. Friend the Member for Oxford, East chiding the Paymaster General for not making a good enough case. He prompted him, telling him what he should have said, and how he should have put the case. There is a bipartisan coalition between the two Front Benches.

Mr. Winterton : Tripartisan.

Mr. Leighton : Perhaps the hon. Gentleman is right, and we should also include the hon. Members for Inverness, Nairn and Lochaber (Sir R. Johnston) and for Ross, Cromarty and Skye (Mr. Kennedy). The matter is serious. If we have a single currency, which is the objective of the treaty, we get a single central bank which, we are told, will be independent. That is a nice word, although autonomous would also do. But independent of whom? It will be independent of us, of Parliament, of anybody who has been democratically

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elected. It will be beyond the reach of the ballot box. The electorates of all the countries of the Community will be stripped of their powers.

I have always understood the historic purpose of the Labour party to be to bring money under democratic control, although some may think that a Utopian idea. That was one reason why Clem Attlee nationalised the Bank of England. He saw what bankers had done in the 1930s and he thought that banking should be brought under democratic control. He must be turning in his grave, given what the party is saying at the moment.

Mr. Budgen : I am sure that I do not need to remind the hon. Gentleman that, on Second Reading of the Bill to nationalise the Bank of England, Robert Boothby voted in favour and a number of Keynesian Tories abstained because they took the view that the bank had been a major cause of the unemployment and depression in the 1930s. They believed that there should be political control of the bank.

Mr. Leighton : That is exactly right. They saw what the bankers had done before the war and people, having fought for six years, were not prepared to accept a world run by bankers. Clem Attlee nationalised the Bank of England, but we shall have to change that and say "Clem, you got it wrong". I am not prepared to do that.

If we pass the Bill, all monetary, exchange rate and budgetary policy--all the bread-and-butter issues of British politics--will be handed to institutions beyond our control. That is the opposite of what the Labour party stands for. In those circumstances, what would be the Labour party's purpose? What could it do? Why should anybody vote for it? We should be preparing ourselves for a fate similar to that of Mitterrand's socialists.

The bank's objectives are laid out in the treaty, but it does not mention unemployment. The only object of the bank--the only aim that overrides and excludes everything else--is price stability. Of course, we want low inflation, but since when has price stability been the sole or even primary aim of the Labour party? If we make price stability our only aim, we betray everything that we stand for. Any fool can reduce inflation by destroying the economy, by inducing recession, by graveyard economics and by creating mass unemployment. That is what the Government have tried to do, but even they have been forced back.

I have a briefing from the Bank of England for November 1992, which says :

"Had the United Kingdom remained in the ERM it is quite possible that price stability would have been achieved during next year"-- that is this year.

"Although clearly desirable in itself, price stability attained so quickly might have intensified the problems of domestic debt deflation."

The bank is saying that we could have had wonderful price stability, but that the price would have been too high, so we did not go down that road.

Although the bank says that we should not go only for price stability, the Labour party seems to agree that price stability should be the sole aim of policy. In the past, Labour's economic policy has always had four aims : low inflation ; a balance of payments equilibrium ; economic growth--when we were in the ERM, growth was negative ; and high employment. That is what the Labour party has always believed in. It is difficult sometimes to keep all the balls in the air, but throughout the history of the Labour

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party it has never been our policy to give sole priority to the one aim of price stability, yet that is exactly what the treaty spells out in the clearest possible terms.

We were able to leave the exchange rate mechanism--we got it wrong. We cut interest rates by 4 per cent. and now have a more competitive pound. I understand that that is now leading to an upturn in the economy. [ Hon. Members-- : "Hear, hear!"] I hope that those hon. Members who are cheering agree that we should not have gone into it in the first place. Under EMU, we would not have been allowed to come out ; we would have been locked in and that would have been that. With separate currencies, if the economy becomes uncompetitive we get a warning signal--the balance of payments deficit--and we can take remedial action. With a single currency, that is not possible. Instead of a balance of payments deficit, there are blighted areas and unemployment and our people suffer.

What will happen if people who are suffering come to us with their grievances? What will Labour Members be able to say to them? How will we answer them? We will have to say, "We are sorry, but we gave these powers away and we cannot do anything about it." We should have to say that politics cannot be of any help or provide any remedy. I do not know how the Labour party can possibly support that. I only hope that the party that I know will come to its senses at some stage. 11.45 pm

Mr. Wilkinson : I enter the debate with some trepidation after two such distinguished speeches as those of the right hon. Member for Bethnal Green and Stepney (Mr. Shore) and the hon. Member for Newham, North-East (Mr. Leighton). Both spoke with tremendous cogency and great intellectual honesty--a quality that has made our debates distinctive, certainly in regard to those who do not support the proposed treaty on European union.

I find it extremely strange that Her Majesty's Government should will the objective of European union--and thereby the mechanistic approach set out in the treaty to achieve it--while not wholly willing the means of stage 3 unless there be first the House's approval by Act of Parliament. This is an inherent inconsistency, which may have been convenient at the time of the general election but which does not bear rational scrutiny now.

The process whereby economic and monetary union is to be achieved is inherently one of convergence. Not just earlier this evening but in previous debates we have heard eloquent descriptions of how damaging that process of convergence has been for our own economy. It has been a shameful process. I simply do not understand how our Government could, with such equanimity, tolerate the wholly unnecessary imposition of the levels of unemployment and misery on our people which characterised the two years preceding our escape from the exchange rate mechanism on 16 September. Anyone with one grain--one iota--of economic nous knew that to perpetuate a regime of high interest rates at a time of world recession was to compound that recession virtually to the point of slump.

Mr. Budgen : Is not my hon. Friend being somewhat unkind to the Government? It might have been reasonable for the Government to say, before 16 September, "There have been only three or four attempts to fix our currency

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to an exchange rate mechanism : each time it has given rise either to a slump or to some other major economic disaster, but none the less we want to try this experiment once more to see whether, with the finesse for which we are renowned, we can defeat the forces of the markets and the law of averages." That is a perfectly respectable argument. Once we had the good fortune to be thrown out of the ERM on 16 September, what further evidence was necessary to persuade the Government that a fixed exchange rate did not work and that a common currency would not work? The Government say that they need further argument and further persuasion to make up their mind. My hon. Friend is very fair minded. Will he explain what the Government have to make up their mind about?

Mr. Wilkinson : I may have been naive, but I thought that the Government were all too ready to make up their mind on such matters, often flying in the face of the facts. As evidence of that, I adduce the remarks of my hon. Friend the Financial Secretary to the Treasury, who in the last debate that we had on EMU told me that the policy of Her Majesty's Government was to rejoin the ERM as soon as the circumstances were right-- and he gave the impression that those circumstances would be right in the not too distant future. When I said that I found it wholly irrational that the Government should embrace the mechanistic approach to EMU contained in the treaty, I did so with good reason. Eschewing independence in monetary policy, losing full control of indirect taxation and taking part in the cohesion fund, which would export jobs from the United Kingdom and create them in our competitor countries in the south of Europe and in Ireland, were in the past--and will be to an even greater extent in the future-- manifestly against our national interest. The same would be true of our embracing the treaty's disciplines on budget deficit and Government debt which, certainly in the case of budget deficit for the time being and probably for the foreseeable future, are beyond the wildest dreams of fiscal probity and discipline.

Sir Ivan Lawrence (Burton) : Is not my hon. Friend again being too harsh on the Government? Is he not aware that some very strong voices in the Government said that we should not join the ERM because they foresaw the very problems which materialised? However, British industry said that it needed stability and the advantages that it was sure that only the ERM could provide. The members of the Government who had strong doubts about the ERM agreed, saying that if that was what industry wanted, that was what they had better give it. The same voices in industry who spoke of the need to go into the ERM are now speaking of the need to ratify the treaty. Does my hon. Friend agree that they were wrong then and that they are wrong now?

Mr. Wilkinson : There is much in what my hon. and learned Friend says. I merely observe that I was struck by the Chancellor of the Exchequer's remarks in his Budget statement in which he seemed to take a perverse pride in our escape from the ERM on 16 September and virtually to claim that it was Government policy. To be candid, I do not think that the Government have received the condemnation that was rightly due. However, one could perhaps be more charitable and say that the Government held an understandable position and were seeking, once and for all, to stamp out the age old British problem of

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inflation and to do so by means of the artificial discipline of our membership of the ERM. They almost did so, but, as the hon. Member for Newham, North-East said, the pain was eventually too great and the medicine was on the point of killing the patient.

Mr. Marlow : Has my hon. Friend had an opportunity to read the Daily Mail today? He said that the cohesion fund would take jobs from this country and create them in Italy, Greece and Ireland. If he had read the Daily Mail today, he might ask what evidence there is that the money would produce jobs anywhere and not go into the pockets of the Mafia, corrupt officials and the IRA.

Mr. Wilkinson : The derogation of the sovereignty of our Parliament and of the British nation through its traditional democratic institutions in favour of the centralised institutions of the Community is one of the most pernicious and damning aspects of the proposed treaty on European union. There have been some eloquent descriptions of it, most notably perhaps from Paul Johnson in The Daily Telegraph today. As is so often the case, my hon. Friend gets straight to the point.

Mr. Budgen : As to why the Government cannot make up their minds on monetary union, the Danes have done so and say that they do not want any form of monetary union. Do the Danes have information that is denied to our Government, or is it that our Government intend to slide into monetary union at some future stage and just want to play for time? I cannot believe that that is true.

Mr. Nicholas Winterton : My hon. Friend is naive.

Mr. Budgen : I hope that the truth is that the Danes know something that we have not been told.

Mr. Wilkinson : I am worried that the Danes may not adequately know what is known to us and of the admission by my right hon. Friend the Minister of State, Foreign and Commonwealth Office in Committee last week that the so-called opt-outs or further opt-outs that the Danes obtained at Edinburgh have no legal effect and are not justiciable. In other words, on 18 May the Danish people will be asked essentially the same question that they were asked in the previous referendum. They believe otherwise, but on this serious matter the Danish people are being misled.

We should not be misled. We have no excuse for being misled. Only last week, an eminent body of Eurocrats examining the fault lines in the exchange rate mechanism--with the careful scrutiny that those fault lines, which so suddenly appeared on 16 September, merit--and with the wisdom of hindsight, declared that there was inherently nothing wrong with the ERM process towards economic and monetary union and concluded that, notwithstanding what happened, the Community should press on regardless to the objective of economic and monetary union.

Mr. Salmond : I understand the hon. Gentleman's point about the virtue of floating and competitive exchange rates between countries, but could not the same argument apply equally within member states? Is it not the case that at various times in the fairly recent past areas such as the north of England, Wales and Scotland suffered from an over-valued exchange rate--the national exchange rate of sterling? Can the hon. Gentleman point to any occasion when he expressed in the House the same amount of

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sympathy for those areas in having to battle against an over-valued exchanged rate, or when he argued for a regional policy designed to combat the consequences and to provide compensation?

Mr. Wilkinson : Yes, I can. Long before the hon. Gentleman entered the House, I was making speeches as the Member of Parliament for Bradford, West in favour of the Industry Act 1972 introduced by my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath). With the benefit of hindsight, I would not make similar arguments today--not because I now represent a London constituency but because I believe that those policies were inherently wrongheaded. I take the hon. Gentleman's remarks with the pinch of salt that they deserve because he and his party sold their souls in earlier Divisions on the Bill, and his arguments do not carry now the weight which they might previously have done.

The loss of control of our economic policy contained in the treaty, notwithstanding the opt-out in clause 2, is such as to cause a fundamental change in the relationship between our people and their Government, as well as between the House and the Government represented in the House, and the institutions of Brussels--so much so that future generations will wonder how it came to be that the generation of 1992 in the House appeared to care so little for their nation's independence, sovereignty and pride. How was it? Were they blind? Were they stupid? Were they misled? Were they ignorant? What was it?

The reason, I believe, lies in the degeneration of our parliamentary processes. We have allowed our Parliament, our House of Commons, to become suborned. It is for this reason that I do not believe that the so-called opt-out in clause 2 is worth the paper on which it is written. If the Bill goes through and the treaty is ratified, I do not think that our people will ever be able to look to the House of Commons as the true custodian of their interests and as the guardian of their liberties.

12 midnight

Our people, if they are denied a referendum, will remember how the Whip was applied, how closures came down in mid-sentence, how closures came down before Front Benchers answered any of the arguments. They will also remember that patronage, intimidation, blackmail and the denial of votes on key amendments may have secured the acquis communautaire but that they will not have secured the proper scrutiny of key legislation for the management of this economy and for the democratic governance of our country. This is why I do not believe that the so-called opt-out from stage 3 counts for very much, unless we change or ways and unless we change our processes. I shall not vote against the clause. [ Hon. Members :-- "Why not?"] Why should I? I hope for the best, as anybody would. I place my hope in a future Parliament. It is for those who are elected to it to make sure that it does its duty. I hope that it will. I am an optimist. It is not for me to make a judgment. I cannot say that I have great optimism, but I hope most sincerely that on this point I shall be proved wrong.

Mr. Rowlands : The powerful speech of the hon. Member for Ruislip- Northwood (Mr. Wilkinson) led to him carrying the Committee, until the last minute of it. I hope that at least he will consider voting against Third Reading, as opposed to clause 2.

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Mr. Wilkinson indicated assent.

Mr. Rowlands : The hon. Gentleman made a powerful case for the way in which parliamentary power will be eroded by the Bill and ion, where lies the diversity and plurality of economic choice which is at the heart of any form of democratic decision making and of any democratic process?

I notice that the rubic to the clause is "Economic and monetary union." I have not been sent here by the people of Merthyr Tydfil and Rhymney to back economic and monetary union and to back the monetarist policies that go with it which for generations have destroyed jobs in the communities that I represent. Over the years, Members of Parliament have come to this House of Commons from our communities to oppose such policies. I do not see why at this time we should support policies in treaty form which, if accepted and implemented, will be irrevocable for all time.

I was interested in the comparisons that were made. In one sense, the economic history was, I am afraid, slightly wrong. Comparison was made with the 1930s. The interesting point about the 1930s and the reason why we have drawn the wrong conclusion is that, oddly, it was Chamberlain, as Chancellor of the Exchequer, when driven off the gold standard--the 1920s equivalent of the exchange rate mechanism--who devalued the pound which led to a 2 per cent. interest rate and, for most of the country, rapid growth. Unemployment fell after Britain came off the gold standard in 1931 from 3 million to 1.5 million. The tragedy of the 1930s was that that growth and prosperity bypassed huge areas of Britain. The absence of any form of regional policy led to large-scale unemployment in regional terms.

The ironic point is that for most of the 1930s the slump was mild and short -lived for large parts of the country. The chief reason for that was that when in 1931 the Tory National Government were driven off the gold standard --the equivalent of the ERM--they were able to follow a policy of devaluation--like floating exchange rates--and interest rates were 2 per cent. That led to a sustained boom in many parts of the country. Alas, that was not the case for south Wales and for three or four other major areas. That, rather than the lesson that one or two hon. Members have drawn, is the lesson to draw, ironically, from the experience of the 1930s.

Sir Russell Johnston (Inverness, Nairn and Lochaber) : Will the hon. Gentleman bring matters a little nearer to today and tell us whether he regards the Bretton Woods experience as a disaster?

Mr. Rowlands : The Bretton Woods experience was very different from the one that we are being asked to write into the treaty. It was a completely different set of principles and arrangements.

Mr. Denzil Davies : A different kind.

Mr. Rowlands : It was of a different kind. What we do know is that, when people have tried to fix exchange rates and have then driven monetarist policies to support them, those actions have led to high rates of unemployment, and to slump and depression. For the life of me I cannot see

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how, as my hon. Friend the Member for Newham, North-East (Mr. Leighton) forcefully put it, the Labour party, above all, can be endorsing or supporting such processes.

Mr. Salmond : Does the hon. Gentleman agree with Lady Thatcher that, in terms of exchange rates, one cannot buck the market?

Mr. Rowlands : I rarely agree with anything that Lady Thatcher and Lord Lawson say. However, once or twice they get it right. In the case of fixed exchange rates and the experience of the ERM, those who were critics of that arrangement--a number of hon. Members on both sides were critics-- have been proved right. The point was put more than forcefully by my hon. Friend the Member for Newham, North-East. Why should we listen to those who got it hopelessly wrong in the past 18 months to two years, and why should we believe that they are any more likely to get it right next time?

Mr. Geoffrey Dickens (Littleborough and Saddleworth) : How can the hon. Gentleman possibly compare the 1920s with today? We should remember that today we have automation and mechanisation. We do not see a conductor on a bus. To get out of a station, one puts in a ticket, and to get on to the train one gets a ticket out of a machine. So many jobs have been lost as a result of high technology. We do not have a labour-intensive economy-- [Interruption.] My point has everything to do with monetary policy. The hon. Gentleman is trying to compare unemployment in the 1920s with unemployment today. He is simply not comparing like with like.

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