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Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. Time is up.
9.2 pm
Mr. James Couchman (Gillingham): I am delighted to speak in this evening's debate. As the hon. Member for North Durham (Mr. Radice) suggested, I am one of those who signed the European Movement policy statement that appeared in The Times on Monday. That statement accorded with much of the Government's position on many of the major issues that now confront the European Union.
I am no more a Euro-federalist than the great majority of Conservatives in the House or the country, but I wish to see the United Kingdom play a full role in a union of sovereign nation states. By full role, I mean that we should cease to play Eeyore at every possible opportunity. I have no doubt that the unhelpful policies adopted by the EU over bovine spongiform encephalopathy have been backed much more enthusiastically by some countries that are aghast at our frequently obstructive attitude.
Today's debate is principally about the economic issues facing the EU, particularly the single currency. I am pleased that we have started to discuss the practicalities of a single currency rather than simply indulging in polemics.
Yesterday, I and a number of right hon. and hon. Members on both sides of the House enjoyed a working lunch with senior members of the retail industry. They expressed their aspirations and fears about the changeover to a single currency should the United Kingdom decide to join such a currency. They did not express a view either way as to whether we should or should not join, but they identified the possible difficulties of training staff, educating customers and reprogramming cash-handling equipment. They pointed out the considerable advantages of a "big bang" approach--a direct changeover rather than running two currencies in parallel.
The retailers pointed out how unsuitable a date 1 January would be, as it falls in the middle of their busiest time of year. Mid-February or mid-October would be much better, they said. They asked for national and international consultation, and I trust that that will happen, for the retail industry will need at least three years' lead-in time to make a smooth transition to a single currency. They were particularly worried about over-prescriptive arrangements for pricing, especially unit pricing. Our retail friends were, however, able to appreciate the advantages that the low on-costs in Britain would have on much more transparent pricing across Europe. Lower prices in Britain could significantly benefit British retailers.
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The discussion with people who will have to adapt their businesses to the introduction of a single currency if--or more likely, when--it occurs was very useful and practical. It was also a good example of why my right hon. Friend the Prime Minister has been absolutely right to keep the British option open to the point where the whole scheme and its regulations and mechanisms will be negotiated and agreed. The Maastricht opt-out negotiated by my right hon. Friends the Prime Minister and the Member for Kingston upon Thames (Mr. Lamont) was indeed precious.
I am no great economist and do not pretend to be able to foresee the macro-economic consequences of a single currency, but I am not alone. In June, I attended a Confederation of British Industry conference on business in Europe. Some of the great panjandrums of British industry were there, telling the Government that they had to give a great lead to our push for European business.
Somewhat imprudently I asked those great leaders for a lead from industry on whether the United Kingdom should join a single currency in the first wave. There was a nervous coughing and spluttering into their sleeves by the chairmen of BA--British Airways--BP, BT, and B almost everything else, but answer came there none, for there is no certainty even among the major companies represented in the CBI about whether we should join.
No one knows what impact our participation--or perhaps our non-participation--in the first wave will have on the City, which is Europe's and possibly the world's pre-eminent financial centre. It would indeed be surprising if some of EMU's fiercest critics were not to be found in the ranks of foreign exchange dealers--self-interest is probably viewed as a quality in those circles.
What I do know is that if the Government had closed the possibility of the UK joining a single currency before May 2002--the probable end of the next Parliament--and a single currency introduced by our partners in our absence had a seriously deleterious effect on the City's complex but vital markets, the British Government would have been grossly negligent in their duty to do what is best for Britain.
There is great uncertainty about the impact on various aspects of our economy of a properly constituted single currency scheme. Will it lead to substantial employment migration from the poor south in Europe to the prosperous north? With falling unemployment in the UK at present and rising unemployment elsewhere, such migration could and may be taking place now--hence blond, blue-eyed Finnish nurses in Hackney. Employment migration certainly takes place in the United States from time to time.
Resource transfer from northern to southern Europe, or in future to new entrant countries in eastern Europe, might be necessary to turn back that tide, but employment and resource adjustments are more a feature of the single market than the prospect of a single currency. They will happen whether the UK joins a single currency or not. EMU would not limit Parliament's powers to tax and spend, although it would prevent future Governments from avoiding the consequences of their decisions. We could choose to be a low-tax, low-spending economy or a high-tax, high-spending economy. We could not be a high-spending, low-tax economy and cover the deficit by borrowing or monetisation--but only an irresponsible Government would want to do that.
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Britain has been remarkably successful in attracting investment into Europe from outside Europe, as several of my hon. Friends have said, and 40 per cent. of American and Japanese investment comes here. The European operations of three Japanese second or third-line companies are located in my constituency, partly for Gillingham's unique connections with Japan but mainly for the reasons why so much inward investment comes to the UK: the English language, benign company and individual tax regimes, a flexible and relatively well-trained work force, low social on-costs for labour, and so on. Above all, as my hon. Friend the Member for South Derbyshire (Mrs. Currie) said, companies from the US, Japan and other major far eastern countries set up their European operations here because we are in Europe. Those of my hon. Friends who advocate staying clear of any closer links with Europe, whether economic or political, and furthermore advocate a progressive disengagement from Europe, neglect to tell us what might happen to the hundreds of thousands of jobs already created here by inward investment or to such investment in the future, if their proposals were adopted.
Mr. Stephen Timms (Newham, North-East):
The hon. Member for Gillingham (Mr. Couchman) made an interesting speech, but the question that I wish to raise at the conclusion of today's debate is what sort of nation we want Britain to be in the future. Those in the Conservative party who attack the Prime Minister's policy frequently tell us what they do not want our future to be. They do not want us to be part of a federal European super-state ruled from Brussels, and we can all agree with that, but what they do not tell us is what sort of nation they do want us to be. Like it or not, Europe and the world are changing and we must change as well. We cannot stay as we are because our role in the world will change and the question is what we want that change to be. Conservative Members sometimes give the impression not only that they want our role to stay as it is now, but that they want it to return to what it was 100 years ago. That will not happen. We must be realistic in making a shrewd assessment of the future role that Britain can play in the world.
Let us suppose that we stay out of European monetary union for good. Most European countries will join it and it will extend to much of Europe the success that the deutschmark has enjoyed in Germany since the war, with low inflation and low interest rates. The euro will stand alongside the dollar and the yen as one of the world's three main currencies.
If we stand outside and stick with the pound, what will be our place in the world? Some 20 minutes away through the channel tunnel, one of the world's strongest currencies will be operating. More than half our international trade
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We have a poor record on investment, which is at the heart of our current economic weakness, and the weakness of our currency against the whole euro zone will simply make matters worse. It is true that we have captured a large share of the investment coming from outside Europe, but the benefits of that are dwarfed by the problems of the small investment in the United Kingdom by ourselves, so that our total level of investment is much smaller than elsewhere and much less than it should be. Permanently higher interest rates in the UK than in the whole euro zone will simply make matters worse.
It is not only our economic prospects that will be so gloomy if we stay for ever outside monetary union. We need to square up to the much wider question of our role in the world and, indeed, our sovereignty. Given economic and monetary union, Europe's main economic decisions will be made in Frankfurt. We will inevitably follow whatever is decided there because our trade is so dominated by countries in the euro zone. If we are not in the monetary union, we will have no say whatever in those decisions, but we will be profoundly affected by them. Surely the sovereignty argument, which is frequently articulated by Conservative Members, pushes us to be inside monetary union rather than outside it, because at least that way we will have a say in the most important decisions about our economy which, as I say, will be made in Frankfurt whether we are there or not.
I submit that being a committed member of a strong European Union--pooling our sovereignty in some areas in order to exercise our influence through the European Union and seeking to win the arguments about how Europe should be run--presents an attractive future for Britain. That approach would retain for Britain in the new millennium the influence that we have enjoyed in the latter part of this one, but in a modern form that can prosper in the new conditions of the world economy.
That will work only if the governing party ceases to be rent asunder by people arguing that we should not be involved. As the Prime Minister recognised on Sunday and again yesterday, he cannot win the arguments in Europe with the current shambles at home. Given a consensus in the governing party, participation in Europe--including in monetary union--holds out an attractive future role for our nation consistent with our history and with the reality of our current strength as the home of just 0.5 per cent. of the world's population.
What sort of future role do those who want us to stay outside monetary union or to leave the European Union want Britain to have? We know that they do not want Britain to be in a federal super-state, but what do they want? Some, undoubtedly, want Britannia to start ruling the waves again. My suspicion is that their position is based on an unrealistic view of Britain's place in the world. If that is not what they aspire to, what do they aspire to?
The realistic alternative to membership of economic and monetary union is for Britain to be the Canada of Europe. I am not denigrating that option. We need to have
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If we allow ourselves to keep our own weak currency and our economy is dominated, as it will be, by the strong European currency over which we have no influence, damage will be done not just to our economy but to our role in the world. By exercising influence through Europe, we can retain a role consistent with reality and with our history.
Playing a full part in Europe also holds out the prospect of a decent future for all our people, not of large numbers sliding into ever greater disadvantage compared with the few. As my hon. Friend the Member for Linlithgow (Mr. Dalyell) said earlier, that is why the trade union movement supports monetary union. It was striking that of all the major institutions to give evidence on monetary union to the Treasury Select Committee, the Trades Union Congress was the most supportive of the project.
It may not be possible for us to join monetary union at the outset, but we should not fool ourselves that sitting around and waiting to see how it works out before deciding whether to join will solve the problems. All the Chancellor's concerns about giving up our seat at the table would then arise again and the union that we eventually joined would have been completed in our absence. Missing the first wave and going in late would cause serious problems, as the Treasury Select Committee report points out.
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