House of Commons Hansard Debates for 13 Feb 1995

Mr. Barry Legg (Milton Keynes, South-West): This evening's debate has moved without hindrance to the issue of a single currency and a European central bank. The last few speakers have all focused on those issues; the House is right to focus on them. The establishment of a single currency, a single interest rate and a European central bank is an issue that goes to the heart of democracy in this country, and to the heart of our constitution.

Time is running short for Her Majesty's Government to say clearly where they stand on this issue. Hitherto, the policy has been to wait and see, but that cannot go on for ever. There will be a single currency--of that I have no doubt. The Maastricht treaty provides for it to be established on 1 January 1999. It will go ahead, with a certain number of states participating. If a country wants to join the single currency, it will have to make the decision no later than 1 July 1998.

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At the start of the year, my right hon. Friend the Prime Minister made some helpful statements. I think particularly of his interview on 8 January with David Frost. As I said earlier when I intervened in the speech of my hon. Friend the Minister of State, Foreign and Commonwealth Office, my right hon. Friend made it clear that he was keeping open the option of a referendum. He said also that he considered that a firm commitment to a single currency was a major constitutional change.

When my hon. Friend the Minister of State responded to my intervention, things were slightly less clear cut. He said, "I think that is the case still." Some ambiguity seems to have crept in. I hope that it will be made clear later this evening that the Government still believe that the single currency is a major constitutional issue, and that they are keeping open the option of having a referendum on the issue.

Why should doubts have crept in? Were the comments made last week by my right hon. and learned Friend the Chancellor of the Exchequer, when he sought to play down the political aspects of monetary union, something to do with the hesitancy that we saw on the Government Front Bench earlier today?

When my right hon. and learned Friend the Chancellor recently gave evidence to the Select Committee on the Treasury and Civil Service, he seemed to get to the heart of the matters that we are discussing. When he was asked whether there had been a movement in the balance of power between himself and the Governor of the Bank of England in setting domestic interest rates, he did not agree. He said: "the power"--

that is, the power to set interest rates--

"lies with the Chancellor because the Chancellor is accountable to Parliament and I do not think Parliament would allow the Chancellor to surrender that power."

There we have it. The position is set out clearly by the Chancellor. My right hon. and learned Friend dealt with the importance of a British Chancellor being able to set interest rates and being accountable at the Dispatch Box to the British Parliament. He went on to press the point even harder. He said:

"I think actually one thing which we have retained which, I do not want to get flippant about, is that nobody is arguing that we have thrown parliamentary accountability because I come here and I answer for the decision."

That is what most of us on the Government Benches want to see continuing. We want a Chancellor setting interest rates with the Governor of the Bank of England and being accountable to the House for his decisions.

The provisions set out in the Maastricht treaty would not allow that process of accountability to continue. The establishment of a European central bank clearly takes the relevant powers away from the Chancellor. The European constitution could not be clearer. It could not be clearer also from reading that constitution that monetary union is not a purely technical and economic matter. Instead, it is of fundamental constitutional importance. It creates a central bank that is unaccountable. The constitution of the central bank has been described as being even harder than the Bundesbank, and we know that the Bundesbank constitution contains

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provision for the bank to take into account German economic policy--the policy of the German Government--when setting interest rates.

In the constitution for the European central bank, which we passed some 18 months ago, the only criterion is price stability. The running of the bank is placed in the hands of unaccountable officials. Six officials are elected to the executive body of the bank. They are chosen by the Governments that decide to go ahead with monetary union. Once the six officials have been elected, they are no longer accountable. They have an unrenewable term of eight years. The governors of the domestic central banks join the six officials to set interest rates. However, the governors of the domestic banks, as I think Lord Kingsdown remarked, are really no more than members of a country branch of the European central bank. Power will lie with the six elected officials.

Article 3 of the Maastricht treaty sets out clearly the responsibilities of the six men. They will have responsibility for monetary policy, which means setting interest rates. How will those rates be decided? That will be left to a simple majority of the members of the governing council. The six will have the power to conduct foreign exchange operations. They will also have the power to hold and manage the official reserves of the member states and to promote the "smooth operation" of the payment system. Power will be put into their hands. They will be able to call upon minimum reserves from the credit institutions across the member states of the monetary union.

The six men will be responsible for setting interest rates and monetary policy as a whole. Anyone who considers the constitution behind the European central bank in a pragmatic and sensible way will say that it is not a feasible way in which to run European economic policy. Our lessons from the exchange rate mechanism, to which the hon. Member for Great Grimsby (Mr. Mitchell) referred, should still be clear in everyone's minds.

Politicians deciding upon arbitrary exchange rates and expecting their domestic economies to fit in with the rates they have fixed will damage their economies. We need freely floating exchange rates throughout the European Community if we are to get the best that we can from the prosperity of the Community.

The hon. Member for Gordon (Mr. Bruce) talked of small businesses gaining from a single currency. I think that he is out of touch with what businesses are like these days. I visited a medium-sized business in my constituency which has a turnover of £10 million a year. The company trades throughout the world, with customers in 34 countries. It is a global business.

If the British exchange rate is artificially linked to the deutschmark and irrevocably fixed, the business is at risk. That is what the managing director told me. He said that, if the United Kingdom had not left the exchange rate mechanism in September 1992, he faced ruin in his business. British businesses are global, and they need flexibility. They cannot afford to have the British exchange rate locked irrevocably to the deutschmark.

Currencies are important as shock absorbers to allow countries to adjust to continually changing economic circumstances. In his speech on Thursday night, my right hon. and learned Friend the Chancellor of the Exchequer sought to play down the political and constitutional

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implications of a single currency. I think that he did a disservice in doing that. He gave two examples of countries that he believed had retained their sovereignty but had linked their currency to another state.

What were the two countries that he selected? The first was Austria, which had linked its currency to the deutschmark. I must tell my right hon. and learned Friend that the size of Austria in economic terms--its gross domestic product--is just under a tenth of the German economy. My right hon. and learned Friend's second example was the Republic of Ireland, which has linked its currency to the pound sterling. Again, I must tell my right hon. and learned Friend that the economy of Ireland is less than 5 per cent. of the UK economy. It is possible for very small economies that are dependent on other economies to link their exchange rates to those larger economies.

Mr. Sweeney: As an Irishman, I am well aware that, for many years, the Irish pound and the British pound were worth exactly the same. Is it not significant that, despite being a small economy, Ireland chose to separate its pound from the British pound, thereby demonstrating the desire of a particular nation for the symbol of nationhood which its own currency represents?

Mr. Legg: I was just coming to that point. Eventually, Ireland detached its currency from sterling. It can be argued that Ireland's best economic interests were not served by tying itself to sterling, as the nature of the Irish economy, which was largely agriculturally based, did not equate to the nature of the United Kingdom economy. It is possible from time to time for smaller economies to link their currencies to much larger economies. Hong Kong does it with the United States. We did it during the Bretton Woods period. It is possible to do it with very large economies for a certain time, but it is not viable to link economies of medium-sized states, because they will experience quite different shocks to their economy. We cannot make the decision to lock our currency to another medium -sized economic power, and--what is more--make a decision that is irrevocable. If we accept monetary union, we are making an irrevocable decision.

Mr. Bernard Jenkin (Colchester, North): Is not the crucial difference between the so-called monetary union between Austria and Germany, or between the Republic of Ireland and the United Kingdom, not only that they were revocable but that they retained separate central banks, separate foreign currency reserves, separate gold reserves and total independence? The choice to link their currency was a decision for each of those sovereign states, whereas that arrangement bears no relation to what is set out in the Maastricht treaty, which is a legally binding irrevocable monetary union?

Mr. Legg: My hon. Friend has hit the nail on the head. Those countries had the flexibility to change their currency if they so wished. They retained their own central banks, and the democracy and economic opportunity that went with that. Ireland, as my hon. Friend the Member for the Vale of Glamorgan said, made that change, but we are being called on to make an irrevocable decision on which we cannot go back.

One can think of more and more factors that one might take into account in judging whether convergence is taken into account. For example, one might look at the tax

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burden of each state, its overall balance of trade, the percentage of trade that it conducts across the world, its investment percentages across the world. It might just be conceivable that, at some point, convergence might take place, but politicians are notoriously lacking in the ability to pick that moment, as we have seen from our own recent economic history.

But even if we did pick the right moment, that convergence could not continue for ever and a day. That is the point. We would have given up our currency and our economic flexibility, with the objective of achieving something that I believe would be deeply damaging to the British people and our economy.

Mrs. Teresa Gorman (Billericay): Is it not true that, in a way, we already have a common currency with the dollar? More people use it voluntarily than probably any other currency. More people use the pound sterling as a type of common currency than the deutschmark, so to link ourselves to the deutschmark, which is foreign in its nature to most people, is quite ridiculous.

Mr. Legg: I agree with my hon. Friend. One of the great problems we had when we were in the exchange rate mechanism was that our link with the deutschmark took us to $2 to the pound. For anybody in Britain trying to do business with the United States--many of our companies do--at such an exchange rate, that just was not on. The hon. Lady is right to say that the dollar is a very important currency. However many conditions we come up with for monetary union, at the end of the day we must accept that, under the Maastricht treaty, a political decision will be made on whether there is a single currency. It will not be done just on economic factors.

Many hon. Members may remember the Madrid conditions, which Professor Alan Walters came up with to please the Prime Minister of the day. He believed that they were impossible to achieve, so tough were the conditions. What happened? The Madrid conditions were never fulfilled, but we entered the ERM, with the problems that ensued. I ask hon. Members not to put all their faith in economic conditions and convergence criteria, because at the end of the day they can go by the board.

Mr. Nick Harvey (North Devon): Is the hon. Gentleman aware that politicians all over Europe who are committed to the idea of a single currency are artificially manipulating economic indicators to ensure that the convergence criteria are met? Is it any satisfactory indication of anything?

Would it not be better for us to see whether convergence criteria that have been met could be sustained through a complete economic cycle, because those who build their house of straw will rapidly see it come unstuck when their economies at home hit a downturn? The fact that they can achieve that happy convergence at one point is no indication of anything that could be a foundation for a future currency.

Mr. Legg: The hon. Gentleman makes a valuable point. Some 12 months ago, I visited Germany. Having had discussions there about the convergence criteria and the level of debt, I learned that the level of debt that the German Government disclose to meet the 60 per cent. debt criteria does not include the East German debt that they inherited.

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The hon. Gentleman is entirely right: politicians who have the political objective of achieving monetary union will dilute and tamper with the conditions to achieve their political objectives. We should not be surprised about that, because they have been very open with us.

Chancellor Kohl has been very open. He said that of course one gets political union with monetary union; it cannot operate in any other way. He must be right. If one thinks about what it means to have one interest rate and one currency, one sees that one must have fiscal transfer values to try to make the system work. The safety valve has been taken away, so one needs to transfer tax revenues to the regions that are not doing very well.

As hon. Members on both sides of the House have said tonight, that is precisely what happens in the United Kingdom with the single currency that we have here. That is precisely what would happen with a European single currency. Taxes would have to be raised and transferred to the regions that were doing badly because they had lost flexibility.

Mr. Marlow: Is not my hon. Friend setting out a rather exciting prospect: a bunch of countries in the European Union will fudge the convergence criteria and will join some single European currency? They will have got it wrong. There will be massive transfer payments and massive social payments, so that part of Europe will become increasingly uncompetitive, with increasingly higher interest rates and inflation, and we in the United Kingdom, with Thatcherite economic policies, driven by our desire to make our industry and trade prosper, will be the rich men of Europe.

Mr. Legg: My hon. Friend has outlined what some might consider a golden scenario. It is certainly a prospect to warm many of our hearts. It is so reminiscent of what we were told when we were in the exchange rate mechanism. We were told then that, if we left the ERM, interest rates would have to rise; tonight we have been told that, if we had a single currency, interest rates would be lower.

When we came out of the ERM, despite what we had been told by the Chancellor of the Exchequer, we suddenly found that we could cut interest rates to the level that was required domestically. There is no guarantee that a single currency would produce lower interest rates or lower inflation. As politicians, we shoulder a grave responsibility in making the decisions that we are making now.

Mr. Whitney: My hon. Friend seems to see no difference between the single currency and stage 2 of the exchange rate mechanism.

Mr. Legg: I do see a difference: the single currency would be much worse. At least we could come out of the ERM. As the hon. Member for Great Grimsby pointed out, George Soros could come and rescue us, and with one bound we were free. We can never come out of the single currency. The position will be irrevocable. Having given up our currency and transferred our reserves to the European central bank, we shall have banished the option of having a currency of our own and setting interest rates in accordance with domestic monetary conditions.

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I think that most hon. Members understand the magnitude of the issues and policies that we are discussing. Surely it is time for the British Government to make their position clear. The decisions governing whether we enter a single European currency will have to be made--

Mr. Peter Mandelson (Hartlepool): In 1998.

Mr. Legg: The hon. Gentleman is right. The Prime Minister has already ruled it out for 1996 and 1997, however, and I believe that ruling it out for 1998 will be just one more small step.

The Government cannot put off this decision. They will have to explain whatever they decide to the British people in the next general election campaign; they cannot hope to fight an election in 1997 saying, "We do not know whether we shall go for a single currency in 1998." They must either rule it out or promise a referendum. I hope that, when he winds up, the Minister will begin to clarify the Government's position on a vital issue that is crucial to the British economy and the British people.

8.52 pm

Mr. Giles Radice (Durham, North): I wish to return to the subject of the motion. I share many of the views of the right hon. Member for Yeovil (Mr. Ashdown) on the European Union. For many years, I believed that it was in the national interest to co-operate and, if necessary, integrate with our European partners--

Mr. Austin Mitchell: At any cost.

Mr. Radice: My hon. Friend has had his say, at considerable length. Perhaps he will allow me to make a three-minute speech. The European Community has achieved a great deal for this continent. It has helped to keep peace in Europe, and it has helped to create unparalleled prosperity. [Interruption.] It certainly has, as anyone who had studied a little history and viewed the past from a slightly wider perspective than the past three or four years would know. It is essential to the future of the continent, which is why so many countries want to join the European Union: three of the four EFTA countries that held referendums voted to join. I agree with the Prime Minister that Britain ought to be at the heart of Europe. That is not what we are discussing, however. We are discussing whether there should be a referendum. I strongly support the idea of involving the people more in major European decisions, because we are a Europe of the peoples rather than a Europe of the elite. I agree with my hon. Friend the Member for Great Grimsby (Mr. Mitchell) that that means that the people should be consulted on such decisions; the question is how they should be consulted.

That consultation need not necessarily take place by means of a referendum. It could take place in a general election, if there were a major difference between the views of the two parties. The Conservative party is changing so rapidly that it is not beyond the bounds of possibility that it will fight the next election on an anti-European ticket, although I hope very much that it will not. Those in the Conservative party who speak for

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the European cause have a responsibility in that regard, and I am glad to say that they are just beginning to wake up to it.

Mr. Marlow: There are not many of them.

Mr. Radice: There are indeed. Perhaps they should speak a little louder; then we would not hear quite so much from the hon. Member for Northampton, North (Mr. Marlow).

If there are no strong differences between the parties, however, there will be a case for a referendum. I do not agree with the right hon. Member for Worthing (Sir T. Higgins) that a principled objection can be advanced: it is possible to believe in parliamentary democracy while supporting the idea of a referendum on constitutional issues. In 1975, we had a referendum on whether we should leave the common market. We did not hear much about that from my hon. Friend the Member for Great Grimsby, but that is probably because he did not like the decision; certainly he never accepted it.

I voted yes in that referendum, as did the majority of British people. Other countries have had more frequent referendums on European issues-- especially France, Spain and Denmark--to decide not just questions of accession, but other questions. There is, however, a problem with ad hoc national referendums, which are often decided on national issues. As my hon. Friend the Member for Swansea, East (Mr. Anderson) pointed out, the French referendum was decided partly on the basis of whether people were for or against President Mitterrand. I know, because I was involved in that referendum--on the yes side, unlike others who have spoken.

The first Danish referendum was decided partly as a result of the unpopularity of the Conservative Government of the time. The second was won partly because there was a new Social Democrat Government who were able to present a new broom. The Swedish referendum could not have been carried by the Conservative Government, who were very unpopular at the time. That Government had the good sense to wait until they had been defeated at the polls, and it was a new Social Democrat Government--who were quite popular at that stage--who were able to carry the referendum.

I believe that we should hold European-wide referendums on major issues, and that they should take place on the same day. They would be decided on a national basis, but at least such a process would iron out some of the purely national issues and focus people on the European issues. I hope that the European nations will consider that at the 1996 intergovernmental conference.

I do not share the view of some of my hon. Friends that somehow we would lose in a referendum. Some of my hon. Friends gave away the fact that their support is cynical. They think that they can win it and that that is the only way in which they can stop Europe going forward. I do not believe that. The British people are sometime reluctant Europeans but they do not want to be left out of what is happening. My hon. Friend the Member for Great Grimsby may want to be left out but the British people do not. They showed that in 1975 and if there is a referendum they will show it again. I am certainly not against the principle of a referendum, but it would be a question of what would have to be decided at the time.

I am aware of Liberal Democrat policy and I do not blame the party for putting down the motion. It was perfectly fair for it to do so and we have had a good

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debate on the issue. However, it cannot be said that it is a serious attempt to defeat the Government because if it were there would have been wide consultation with the Labour party. The Liberals would have asked Labour to write the terms of a resolution. If they had really wanted to defeat the Government with the support of the Labour party, that is the way they should have gone about it. They did not consult the other minority parties, either. I do not criticise them for that, but they should not pretend that the motion is a serious attempt to defeat the Government. It is a legitimate exposition of Liberal Democrat policy which contains some sense, and it has provided us with a good debate. I congratulate the Liberal party on that. If there is to be a coalition of ideas there will have to be give and take and there has not been quite enough of that in the debate.

Mr. Charles Kennedy: Given the hon. Gentleman's forthcoming role in the European movement, on which I congratulate him, he will have some influence in that give and take. May I correct the hon. Gentleman as I did earlier? His account is factually incorrect, I am sure not wilfully, but he is wrong.

Mr. Radice: I think that there are different versions of what happened.

Mr. Spearing: Or what did not happen.

Mr. Radice: Yes, but there was no attempt to say to the Labour party, "You write the thing and support--"

Mr. Ashdown: That is give and take!

Mr. Radice: If the Liberal Democrats were interested in defeating the Government, that is what they would have done. The Liberals were interested in having a good debate and perhaps hoped to raise their profile, with which they have had some difficulty in recent months. That is perfectly legitimate and I do not complain about it, but let us not pretend that the motion is a serious attempt to defeat the Government.

Mr. Ashdown: My hon. Friend the Member for Ross, Cromarty and Skye (Mr. Kennedy) told the hon. Gentleman that he was factually wrong. Clearly, he was not prepared to take that, so perhaps he will accept some of the details. He rightly said that this requires give and take. But his definition of that is that we give and they take. I shall tell him exactly what happened. The words were drawn up and there was widespread consultation with other Opposition parties, including the Labour party. Labour Members were shown the words and offered the opportunity to change them or at least suggest how they might be changed. The offer was not taken up; there was no response from Labour. Far from the situation being as the hon. Gentleman describes, the truth is that all this is a charade and a farrago, because right from the start there was no intention of voting in favour of the motion.

Mr. Radice: It would be a pity if the debate were just a squabble between the Labour party and the Liberal Democrats. The Conservative party would like that very much. I shall not quote the Evening Standard or the memorandum by the hon. and learned Member for Fife, North-East (Mr. Campbell) because that would not be sensible. The leader of the Liberal Democrats may have

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read it and may know what is in the Evening Standard , but let us not have that kind of detailed claim and counter claim.

Mr. Bernard Jenkin (Colchester, North): Will the hon. Gentleman give way?

Mr. Radice: No. I said that my speech would be short and I am coming to the end of it.

I am in favour of a referendum, if necessary, on major European issues. I should prefer to have it on a European basis because that is a much more sensible way to go.

9.3 pm

Mr. Michael Fabricant (Mid-Staffordshire): This has been an interesting, thought-provoking and revealing debate, because it has demonstrated that the undoubted divisions are not just in one party. When Hansard is analysed tomorrow it will become clear to everyone that the Labour party is divided, as are the Liberal Democrats, as we heard earlier.

The whole thrust of the debate is to discuss a future referendum. I want to examine the possibilities for that and to make some predictions--not just for two or three years hence, as many hon. Members have done, but for a little further into the nation's possible future.

Some hon. Members have already said that a referendum should be called on greater integration, but that begs the question of degree. Every statutory instrument, every Act whose genesis was in Brussels, is yet another step on the road to greater European integration. Since our earliest treaty with another power, such as that with Portugal in the 16th century, there have always been times when there has been a loss of some sovereignty, but that has been outweighed by the greater benefit. Therefore, a surrender of sovereignty is not always against the interests of the state. The advantages must always be weighed against the disadvantages; it must always be a question of degree.

Bilateral treaties can be initiated only by the British Executive, with the approval of Parliament, under the Ponsonby rule. That is not the case with legislation emanating from Brussels, especially that which is subject to a majority vote in the Council of Ministers--that is, not subject to unanimity. Nevertheless, I welcome some European legislation set out in the Maastricht treaty, especially that which gives power to the courts to ensure that rules rigorously applied in Britain are also applied in other European countries that have--how shall we put it?--a more flexible approach to the enforcement of national legislation.

However, let us be clear--not all integration is in this nation's interest. I shall expand on that later. First, I shall return to the subject of our debate, which is whether or not to hold a referendum. It was in 1890 that the Liberal Unionist constitutional lawyer Dicey wrote a pamphlet called "Ought the Referendum to be introduced into England?" At the time, he was concerned with home rule for Ireland. Some 105 years later, it is again the Liberal Democrats, and, it must be said, others, who pose the question whether we should use a referendum to solve a problem that divides Parliament, and not across party lines. Let us make no mistake, views on Europe are as diverse on the Opposition Benches, as we have heard this evening, as they are on the Government Benches.

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I believe that referenda--I say "referenda" and not

"referendums"--are a surrender of the responsibilities that we, as parliamentarians, have fought for over the years. To those who might say that a referendum is a useful tool as a means to an end, I would say that the outcome of referenda are not always predictable. For while it might be assumed that a referendum on Europe would reject greater integration, I believe that if, during a referendum campaign, enough industrialists and others were to predict mass

unemployment--wrongly in my opinion--as a consequence of no greater integration, for fear of jobs and general well-being, a referendum might well come out in favour of greater European integration--hardly the result desired by many who are arguing today for a referendum. The current vexed question is whether a single European currency or fixed exchange rate, for they are the same thing, is an integration too far and a surrender of our constitutional right to government. Is that, too, a question of degree? I think not. I believe that this is one of those rare occasions when there is a clear line to be drawn; when reality is not a shade of grey and it is only the politician who sees it simplistically in black or white.

Although my right hon. and learned Friend the Chancellor was right to say that a single currency is not explicitly a surrender of sovereignty, any economic or historical model would say that implicitly it must be so. When Germany formed its customs union in the 19th century, it led to economic and political union. That worked for Germany in economic terms, although historians might argue that over 70 years it also led to three European wars--but that is not the point.

Political union worked in Germany because the Lander were culturally similar, sharing a common language system, a similar legal system and, on the whole, populations whose lifestyles and personal goals were similar. Garibaldi's unification of Italy's city states, however, has not been so successful. Although the language and legal systems are similar, Italy's population varies greatly between the north and south and that is not simply a function of economic activity. Italy's instability lies with its huge cultural differences.

If there were a referendum on a single currency, would we be voting for a European political union? The answer would definitely be yes. That is not demonstrated only by historical models, for without control of interest rates and other mechanisms, the state would have to surrender its sovereignty on all economic policy, if it were not to be subject to social instability arising from resultant unemployment and falls in living standards.

Mrs. Gorman: I notice that my hon. Friend has tipped a lot of pound coins on to the Bench. Of course, once upon a time, we used to have coins that were more valuable. What will happen to the pound in our pockets if we go into a single currency? Will it be anything like decimalisation, where the value of money halved and the price of everything doubled?

Mr. Fabricant: Many of the pounds in my pocket, or, in this instance, on the Bench, would be diverted to the "Club-Med" countries, especially countries such as Greece and Portugal, which would need sustaining if we were to have economic union.

Who can doubt that if sovereignty were not surrendered in favour of a single political entity, the most powerful economy in any monetary union would be the dog that wags the tail--the tail in this case being all the other

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member states. To take that metaphor further, the dog wags the tail in the interests of the dog and not of the tail. The only possible course of action for the other member states would be to join a single political state with its dominant former partner to mitigate the effects of monetary union.

If a future referendum were to decide on monetary union, even assuming that the convergence criteria were met by all 15 member states, political stability would be short-lived without political union. Full economic union across states and across peoples as varied as the Greek hill farmer and the German factory worker would lead to huge divergent stresses and strains which would pull the union apart again. If that is the case now, how much more unstable would be a union of states including those from eastern Europe, whose economies are even more diverse? Are they to be excluded with other states from an inner-European hegemony? Believe me, it will not only be the common agricultural policy that would be unfundable and unworkable. As we have heard, Eddie George, the Governor of the Bank of England, has graphically pointed out some of the uncontrollable strains and movements of peoples which would be a natural consequence of monetary union. Only a super-state could have any hope of controlling those. There could be no turning back. No sophisticated economy could recreate its own currency once it has been absorbed into a greater whole. Thus, if we were to have a referendum on the question of monetary union, it would be a logical consequence that we would also be voting on an inevitable political union and virtual super-state. That raises a further question. If, in a world, perhaps in the near future, of huge trading blocs, it were deemed necessary for Britain to enter into a monetary union, I personally would rather Britain's union were with states with whom a commonality of cultural and political interest existed, for only then could such a union be stable and enduring. I do not see it as a prospect within the next 20, 40 or 60 years, if ever, but I speculate as to whether Australia's dissatisfaction with her Pacific rim neighbours, and the United States of America's discomfort with her neighbours to the south, might lead to the conclusion that, as the USA and the old Commonwealth share a common language, culture and legal system, mutual integration might be a logical progression.

This might be the only union as enduring as the 288-year-old Union of Great Britain, despite the fact that the Labour party seems determined to break that Union. What of the distances between these countries with mutual self- interest? Do they create impenetrable barriers? I think not. Modern technology and the nature and content of international trade make distance far less relevant, and this will be even more so in the future.

In summary, I am not enthusiastic about referenda per se. They are unpredictable and are a rejection of the powers of Parliament but, if we were to have a referendum on Europe, the questions must be clear. Do we want greater integration? Do we want monetary union, which will inevitably lead to political union and absolute loss of sovereignty? Do we want union which would be intrinsically unstable, with a mixture of peoples with different goals and different dreams? When I was in business, immersed in international trade--much of it in Europe--I would have welcomed a fixed exchange rate, a single currency, but I would not

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have done so at the expense of higher taxation and potential political union introducing socio-business legislation through a socialist back door. By maintaining our opt-outs won for us at Maastricht, we would still, without monetary union, have access to the European markets so needed by our business men as well as those investing in Britain from outside Europe. Does the spectre of the future lighten a different vision?

I am not a Euro-sceptic but a Euro-pragmatist. Unlike some hon. Members, I have lived and worked in many countries in Europe and speak three European languages other than English. I welcome a free trade area in Europe among nation states and the power to enforce it through the courts. However, should we ever need to seek monetary union--I hope that we do not--should we not do so with different partners, partners who are from far beyond our European borders but who share the same dreams and aspirations and who could, in a democratic confederation--should this be necessary--realise the spirit of a new English-speaking nation whose limitless potential could finally be snatched from what is, in effect, a loveless and barren European marriage of convenience?

9.16 pm

Mr. Andrew Mackinlay (Thurrock): I rise to speak primarily because I am enthusiastic about referendums as a device for securing a legitimate mandate from the electorate and because, more generally, as a candidate in five parliamentary elections I campaigned for parliamentary and constitutional reform. I am therefore pleased to have this opportunity to speak for the greater use of referendums in the United Kingdom, and not only for the narrow question of further integration in the European Union.

One issue that has not been raised in the debate is the undemocratic way in which we ratify treaties. It is time that we followed the example of other democracies where, when the Government sign treaties, those treaties are confirmed by an Act of Parliament at the very least. In this country, the royal prerogative is used, which is profoundly wrong.

The Maastricht legislation, which has preoccupied many of us since the general election, was not to ratify a treaty but to deal with the consequential legislative arrangements that flowed from our having signed the treaty. I want Parliament to confirm treaties by Acts. If major constitutional implications follow thereafter, they should be put to the people in referendums.

I speak as someone who has been described as a Euro-supporter. That is a crude and rather stupid term, like left wing and right wing. I have been a member of the Labour party for 29 years. For 28 years of those years, I have been described as a right winger. This year, I have noticed that I am described as a left winger. I have not shifted an inch--other people have passed me by. The terms left wing, right wing, Euro-sceptic or Euro- supporter are meaningless.

I do not believe that it would be feasible, practical or in the best interests of the United Kingdom to contemplate withdrawing from the EU, but it is probably time that Parliament checked public opinion. It certainly should do so after the IGC conference because, whether or not some of us are comfortable in the EU, there is clearly a need to reaffirm policy with the electorate. That can only be done by a referendum for the reasons that have been canvassed

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