| Previous Section | Index | Home Page |
Sir Terence Higgins: My right hon. Friend may not have agreed with everything that I have said. I note that he wishes to intervene.
Sir Edward Heath: I am trying to find something on which I agree with my right hon. Friend. Will he first agree that we must stop kidding ourselves as to what other major countries in the European Union will do? They are determined to get a single currency, and to do so within the time period of which we are aware. There are powerful politicians who will be in place for a considerable period. The President of France is in that position. He will make sure that the programme is carried through. That is the situation that we must face.
Secondly, why are the other major countries in the European Union so determined? They know that it is not possible to keep a single market unless there is a single currency. All history proves that. Indeed, the present world proves that. That is why they are determined to go ahead.
Lastly, let us consider convergence and the United States of America. How much convergence does the US have? There are enormous differences between California, New York state and the southern states, yet the US is the most successful country in the world.
Sir Terence Higgins:
I take up, first, my right hon. Friend's final point. The first question put to me during my third year at Cambridge on economics related precisely to the United States. The reality is that some parts of the United States would probably gain if they did not have a single currency. Some parts of Mississippi, for example, might gain by devaluing. That is not, however, historically the way in which the United States has grown up.
I do not accept my right hon. Friend's premise that there cannot be a single market if there is not a single currency. That is disputable.
I am seeking to put over the case that, if Europe proceeds as some suppose, and in the pejorative terms that I used earlier, the leaders of France and Germany are likely, in pursuing a timetable in the absence of adequate convergence, to bring about the self-destruction of that which they wish to construct.
Ms Abbott:
Will the right hon. Gentleman give way?
Sir Terence Higgins:
I have little more to say, but if the hon. Lady really wishes to intervene, I shall give way.
Ms Abbott:
The right hon. Member for Old Bexley and Sidcup (Sir E. Heath) made the real point, that the political elite of Germany and France are determined to go ahead with economic and monetary union come what may. Does the right hon. Gentleman agree that, merely because the Gadarene swine are determined to go over the clifftop, that does not mean that sensible porkers should go along with them?
Sir Terence Higgins:
There are serious problems. I understand what my right hon. Friend the Member for Old
I have a strong feeling that, if the leaders of Europe go ahead with a core currency without adequate convergence, they may well find themselves--the Germans will certainly regret this--with what has been described as a camembert currency, with a soft section in the middle. We may find that that currency weakens, and that the value of sterling increases. The arrangements to prevent the value of sterling declining may have the reverse effect of what is expected. If that happens, there will be serious implications for our competitive position at that stage. It would be rather good, however, for some other sections of the economy.
Ms Diane Abbott (Hackney, North and Stoke Newington):
It is a pleasure to take up the remarks of a distinguished ex-Chairman of the Select Committee on the Treasury and Civil Service. The decision whether to join the economic and monetary union is the one most important economic decision that faces the British political class. It gives me great pleasure to talk about something of substance such as the economy when over the past few weeks politicians of both major parties have been vying with one another in pontificating on morality and Christianity. I do not believe that the public have much stomach for professional politicians going on about matters of morality. We should concentrate on matters within our competence, such as the decision to join EMU.
It seems, sadly, that the debate on EMU has been hijacked by nationalists. It has been presented all too often in the popular press as a debate between nationalists and internationalists.
My parents came to the United Kingdom nearly 50 years ago from across the Atlantic. I am not a xenophobe and I hold no truck with petty little Englander ideas. I believe that there is a practical case against economic and monetary union on the criteria and timetable that are before us. That is the case that I hope to set out in a modest way.
I am a member of the Treasury Committee. I served under the distinguished chairmanship of the right hon. Member for Worthing (Sir T. Higgins). During my membership of the Committee we have conducted two major inquiries into economic and monetary union. When the right hon. Member for Worthing was speaking, a colleague said to me, "I did not know that he was so anti-Europe." I said, "He is not anti-Europe, but as it
happens economic and monetary union is one of those matters where the more you know about it, the more sceptical you become."
One of the arguments that the Europhiles like to advance in trying to confuse the issue is to ask, "Why are we talking about economic and monetary union now? The decisions are a long way away. The issue can wait. It is a long way down the track." In fact, 1997, next year, is the key year. It is the reference year. It is the year when the decisions of early 1988 will be taken on board. It is also the year during which Parliament will have to vote on whether to make the Bank of England independent in line with the Maastricht decisions, with a view to us going into an independent European central bank. That being so, the arguments that we should not be discussing these matters now because they are a long way ahead of us are simply tosh.
The hon. Member for Gordon (Mr. Bruce), the Liberal Democrat spokesman on these matters, produced as Liberals are wont to do, the orthodox view of an independent Bank of England. The hon. Gentleman suggested that it would be a magical elixir that would be the cure for Britain's long-standing economic decline. The orthodoxy relating to an independent Bank of England is not exactly the fact. The issue will have to be debated next year. There is a case for an independent Bank of England, and one that bears more scrutiny than fashionable opinion has bothered to give it.
There are right hon. and hon. Members on both sides of the House who like to talk about a European central bank as if it is nothing to worry about. They say that at the end of the day politicians will have the final say. That is completely untrue. Martin Woolf of the Financial Times has said that a European central bank would be the most powerful and politically unaccountable bank in the world. It is the political unaccountability of both an independent Bank of England and a European central bank on which the House should focus tonight and in future debates.
Much of the argument, inasmuch as people argue rather than make assertions in a fashionable way, for an independent Bank of England, rests on the notion that there is a causal relationship between an independent Bank and low inflation. The Treasury Committee considered the issues before the hon. Member for Gordon became a member of it. We found that the factual evidence for a causal relationship was slender. There is a relationship: as fashionable opinion always says, Germany has historically had low inflation since the war and it has an independent central bank, but I always argue--the advisers and the information available to the Select Committee back me up--that to find the roots of Germany's low inflation one has to look at Germany's searing experience of hyper-inflation in the 1930s and immediately after the second world war and at a political consensus between management and labour to take inflation seriously. I challenge any of the fashionable pundits to come up with some academic evidence to show that there is a genuine causal relationship between an independent central bank and low inflation.
| Next Section
| Index | Home Page |