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European Communities (Amendment) Act
10.12 pm
The Paymaster General (Mr. David Heathcoat-Amory): I beg to move,
- That this House takes note with approval of the Government's assessment as set out in the Finance Statement and Budget Report 1996-97 for the purposes of section 5 of the European Communities (Amendment) Act 1993.
The purpose of the debate and the motion is to satisfy section 5 of the European Communities (Amendment) Act 1993, which is sometimes called the Maastricht Act.It requires Parliament to approve the assessment of Britain's economic and budget provisions, which the Government then send to the European Commission. The information required is contained in the "Financial Statement and Budget Report", which the House will know as the Red Book. Since the introduction of the unified Budget, that report has contained the Government's tax and spending plans and has described how they are related to our economic and political objectives. Chapter 1 of the Red Book states that the report "will form the basis" of the report required under section 5.
In the past, the Opposition have had difficulty understanding that section 5 debates are not held to approve the Government's economic strategy. That strategy was debated after the Budget statement and continues as part of the Finance Bill proceedings.
My hon. Friends will take pride in the figures in the Red Book and in the stable macro-economic framework, sustainable growth, low inflation, falling unemployment and the firm grip on public expenditure demonstrated in those tables and pages. Those factors were all central to the Budget strategy and have already been approved by the House.
This evening's debate is about the transmission of that information to the European Commission in order to comply with our treaty obligations, and I invite the House to approve the figures.
Mr. William Cash (Stafford):
Will my right hon. Friend give way?
Madam Speaker:
Order. The Minister is apparently not giving way.
Mr. Peter Shore (Bethnal Green and Stepney):
According to the motion, the House is invited to take note "with approval" of the Government's assessment as set out in the "Financial Statement and Budget Report".I must say two things straight away. First, I do not approve of the figures and forecasts in the Red Book; secondly, still less do I approve of the treaty obligations under the Maastricht treaty that we have entered into and to which the motion is related.
I do not think that the House and the country have fully understood that, while the Government--in my view, properly--at least negotiated an opt-out from the full acceptance of stage 3 of economic and monetary union and the single currency, they did not opt out of stages 1 and 2 of economic and monetary union. This evening, we are debating our obligations to economic and monetary union under stages 1 and 2.
I wish to draw attention to the obligations that are placed on us by our acceptance of stages 1 and 2 of the treaty. First, and this is the reason for the debate tonight, article 103 states:
It further states:
If the Commission does not like what it sees and if the figures do not conform to what has been agreed, it can put proposals to the Council that may
Straight away, we have a bit of coercion in stage 2 of economic and monetary union.
The obligations on us go far beyond the obligation to make reports about our economic policy and to have them monitored and invigilated, because we also come under the terms of article 104c, which, as the House knows, deals with the subject of "excessive government deficits". That article states that the Commission
I think we are all familiar with those criteria--that the public sector borrowing requirement should not be more than 3 per cent. of gross domestic product, and that the ratio between national debt and GDP should not be higher than 60 per cent.
Article 104c also contains a formidable arsenal of coercive measures that are available to the Commission and the Council if in their judgment our progress towards the 3 per cent. borrowing requirement for GDP is inadequate. If it is inadequate, the Council may make recommendations by qualified majority vote and, furthermore, it can make public its recommendations if the member state does not comply.
Mr. Tony Marlow (Northampton, North):
Will the right hon. Gentleman give way?
Mr. Shore:
I hesitate to give way, because I realise that the House will have many demands on the limited time available.
Article 109m, which the House has never properly considered, applies now, and it states:
that is, during stages 1 and 2--
The Government are making a report to the Council of Ministers, and presumably they made a similar report last year. What communication have the Government had with the Commission on progress towards economic union? What observations has the Commission made on the fact that the Government's public sector borrowing requirement, standing this year at 4.75 per cent., is well in excess of the reference figure of 3 per cent. contained in the treaty? What have the Government done to treat their exchange rate policy as
Have they deliberately, as it were, operated on the exchange rate so that it is not a floating exchange rate, but a managed one shadowing the ecu and the currencies of the European Community?
Those are important matters, because they directly affect not only the macro-economic policy, our competitiveness through the exchange rate and our interest rates, because we are also pledged to price stability, but the crucial balance between public expenditure and taxation. The idea that that decision, which has belonged to Chancellors of the Exchequer ever since we have been an independent country, should be in thrall to the opinions of the Commission and the majority of the Council of Ministers is unacceptable to us.
Is that not why we have seen not merely cuts in public expenditure and increases in taxation in the past two years, but why the Government, whatever the immediate argument might be about the size of our PSBR last year, this year and the next, are hellbent on conforming with the criteria in the Maastricht treaty so that they will be able to join the third stage of economic and monetary union just as soon as the decision is made in 1998?
The Chancellor said in a reply to a question that I put to him on Thursday:
happen to be--
That may be true this year, but what about the next two or three years? What about the circumstances in which, once we are caught within the frame, we have to keep our borrowing requirements below 3 per cent.?
My objection is not only to the effect that is having on British policy but to the general deflationary effects that the constraints of economic and monetary union are having on the economic policies of virtually all our European neighbour states. Two months ago, Paris was in a state of riot as Parisians objected to the growing deflation to which President Chirac has unfortunately agreed in his arrangements with Chancellor Kohl. Just a week ago, Germany announced its highest unemployment figure for more than 50 years at 4.1 million. It is desperately worried about the problem of having to face the challenge of the competitiveness of countries whose currencies are free or floating and not pegged.
I remind the House, in case hon. Members have not seen it, of the interesting statement made by the former socialist Finance Minister of Spain, Miguel Boyer, as reported in The Times on 9 February. He said:
He summed up by saying:
10.14 pm
"For the purpose of this multi-lateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy".
"the Council shall, on the basis of reports submitted by the Commission, monitor economic developments in each of the Member States".
"acting by a qualified majority on a recommendation from the Commission, make the necessary recommendations to the Member State concerned. The Council may, acting by a qualified majority on a proposal from the Commission, decide to make its recommendations public."
"shall examine compliance with budgetary discipline on the basis of . . . two criteria".
"Until the beginning of the third stage"--
"each Member State shall treat its exchange-rate policy as a matter of common interest."
"a matter of common interest"?
"I am a strong advocate of getting down towards a balanced budget and of low inflation. They happen to be the Maastricht criteria as well"--
"but as we move towards achieving them it is doing no harm to this country's economy."--[Official Report, 8 February 1996; Vol. 271, c. 452.]
"Never has so much damage been done to so many by so few fanatics".
"I do not share the dream of many technocrats and certain elite politicians of maintaining to the death a fiction about dates and conditions of convergence, hoping to catch nations by surprise with economic and monetary union, the significance and costs of which they do not know."
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