House of Commons Hansard Debates for 12 Dec 1996 (pt 26)

Mr. Deputy Speaker: Order. Time is up.

8 pm

Sir Michael Spicer (South Worcestershire): I do not know whether the rest of the House was as struck as I was by the irony of hearing the hon. Member for Brent, East (Mr. Livingstone) giving a lecturette to us all on the wonders of capitalism. He was on a particularly weak point when he spoke about "big is beautiful". He might look at the recent history of IBM to clear up some of his misconceptions.

The Government's objective on Europe--a very admirable one--is to establish a close association of nation states, freely trading and associating on matters on which it is in their common interest so to do. The problem is that there are two obstacles in their way.

The first of these is the inexorable movement towards monetary union. Some people say that that is not there, particularly the Germans, but they will have a terrible shock when they read the treaty, as will their constitutional court when it looks at it more carefully; article 109j is absolutely clear; the single currency will be set up by, at the latest, 1 January 1999. That is one reason why some of us voted against the Maastricht treaty. What is more, article 109k says that the convergence rules can be bent by qualified majority voting to ensure that people can join the single currency, which they have to do by law unless the law is changed, on 1 January 1999.

Nor is it true that, by joining a single currency, one avoids the political association that goes with it. That is one of the extraordinary things that has been said in the past few days. It is quite clear that a single currency is bound to lead towards a single fiscal policy and a single taxation policy. It is not just a question of the stability pact, although that factor has emerged and shows that other things, in addition to monetary policy, are associated with a single currency.

If Europe has a single currency, it will mean a single price system, except for different cost structures for transportation or whatever, with different wages. For example, in Greece there would be German prices but Greek wages; in that case there would either be a revolution or there would be pressure for a massive transfer of resources from the north to the south. The introduction of single fiscal and taxation policies to go with a single currency policy will be inevitable; otherwise, the single currency will simply bust apart. That is sheer logic.

If Britain joins a single currency, it is inevitable that by law we go into something that is "irrevocable". That is the word that the Maastricht treaty uses. It means "for ever", which means that the essence of British democracy--the sovereignty of Parliament and the fact that no Parliament can bind any other Parliament--will be destroyed by the existence of that policy. To argue that somehow there is a remoteness, a separation, between a single currency and deep political matters to do with the federalism of Europe is disingenuous, to say the least.

The question arose in the past few weeks as to whether the British opt-out was foolproof. The House of Commons was at its best when it rumbled the possibility that Britain could be forced into the single currency, or something very similar, through the back door. Anybody who has

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studied the workings of the European Court and looked at the treaty will know that specific parts of the treaty give the Court total powers, under article 171, to impose fines--the issue in dispute a few days ago--where it considers that countries are operating outside the treaty.

In Roman law--a law that depends largely on political intent and relies on the preambles to the law--it is at least possible that the European Court would be able to argue that if Britain was not complying with the convergence conditions, which it would have to do, even if opted out, it was disobeying the law that had been laid down and should therefore be subject to fines. That was at least a possibility, and the House rumbled that. The matter has now--very satisfactorily, in my view--been delayed for resolution for at least six months. That is the way it should be.

The second obstacle in the way of the Government's proper objective of forming a closely associated group of nation states is the inexorable move of European law. As has been already been mentioned, this is based on certain principles--direct applicability, supremacy of European law, the ability of the Court to make its own laws, and the whole issue of acquis communautaire--most of which the Court has arrogated itself. My right hon. and learned Friend the Foreign Secretary said that this was laid down earlier on. It was not. In most cases, the Court has created for itself those important principles. If they are allowed to continue, into what Lord Denning called the tidal rush of European law, swamping our own law, the object of a closely associating group of sovereign nation states will be made impossible.

What do we do about all this? I do not believe that a Conservative Government will ever go into a single currency. I personally wish that they should not, and I wish therefore that they would say so. Failing that, I am personally interested in what has been reported to be going on at the moment in the Cabinet: that a paper is to be produced in the early new year, analysing the position on convergence and the conditions for it. I presume that, if the paper shows that the convergence conditions are not what they are thought to be, and that Britain could not under those circumstances join the single currency, we will say so.

The Conservative party would rally round very quickly if we interpreted that as saying that we will not go into the first wave of the single currency. That is a way through for us. I am very happy that my right hon. Friend the Secretary of State for Health--and others like him not noted as Euro-sceptics--is making the running on this matter. It is right that those who are not Euro-sceptics should make the running. I very much hope that they will, and that this matter will be consolidated into the policy that I have just indicated.

There is no question that what ultimately is required is serious amendment to the treaty of Rome. The question is whether that is possible, because it requires unanimity. The answer is possibly, because other countries also require changes to the treaty of Rome. They keep on jumping up and down, saying that they want to abolish the pillars on foreign and defence policy, that they want single borders. All these matters require changes to the treaty of Rome. They are the demanders in the matter.

Therefore, it is possible for the British Government to go with a set of equal demands for changes to the treaty of Rome, and to say, for example, "We will let you have

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your single foreign policy," whether it is to the French, Germans, Italians or whatever, "in return for which we want back our Parliament. We want a clear protection within the treaty that Parliament will be supreme over such matters as defence, foreign policy, the constitution, the economy and our borders." That is a package for which the British Government could ask; others are demanding treaty changes, in return for which we should be allowed treaty changes along the lines that we require.

Failing changes to the treaty of Rome, I submit that all the aspirations for the kind of Europe that we want would come to nought, for the reasons that I have given. If there is an inexorable, unstoppable move towards a federal united states of Europe, which the British people do not want--and what the vast majority of the Conservative party do not want--there will be an unstoppable move towards pressing for a renegotiation of our position with respect to the treaty and to the European Union. We cannot have it both ways. Either we believe in an association of sovereign states, or we accept what is really going on. That is the option that faces us, and we had better address it before it is too late and the option no longer exists.

8.10 pm

Mr. Terry Davis (Birmingham, Hodge Hill): There are three big issues facing the European Union: the single currency, defence and enlargement. Before I comment on those, I want to comment on the more general issue, as exemplified by a statement that the Chancellor of the Exchequer made yesterday. He told the House:

"fewer and fewer people on the continent"--

I would prefer to say "in Europe"--

"see economic and monetary union as a tool for political integration."--[Official Report, 11 December 1996; Vol. 287, c. 288.]

The Chancellor has not been listening.

As a member of our delegation to the Council of Europe Assembly and the Assembly of the Western European Union for the past four years, I have listened to many Ministers, Prime Ministers and Heads of State, and I have talked with many Members of Parliament from the member countries of the European Union. I do not know whether fewer people are talking about economic and monetary union as a tool for political integration than were talking about it five years ago, but I am absolutely sure that the overwhelming majority of the Governments of the other member countries in the European Union, most of the political parties and probably most Members of Parliament in many of those countries see economic and monetary union as a tool of political integration. That is their aim, and it does us no service to disguise that fact.

We should have the honesty to face the facts. We may disagree about whether political union is a desirable aim, either in the short or the long term, but let us not kid ourselves or the people of this country by pretending that that is not the objective of economic and monetary union. That is the objective.

I can understand the attraction for any Government of a wait-and-see policy on the single currency in the run-up to a general election. However, I can see enough of the outline of this proposal for a single currency to make up my mind that I do not agree with it. I shall not rehearse the details: many of my hon. Friend have made specific points with which I agree.

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What we mean by an independent central bank is that it will be independent of political control. Whatever criticisms we may have of the Chancellor's economic policies, the fact is that if we had had a totally independent Bank of England in recent months, we would have had higher interest rates.

I am in favour of a Labour Government having the ability to control interest rates and exchange rates, or at least to affect them. I recognise that, towards the end of the 20th century, there are limits on any Government's freedom of action, whether inside or outside a single currency, but if we are part of the single currency, we will lose all control of interest rates and exchange rates.

The Chancellor is right--although it is misleading--when he says that we would preserve the right to be responsible for taxation. Yes, we would have that right, just as the state of Arkansas, the province of Alberta or the state of Queensland has the right to taxation. There is no argument about that. What we will not have, however, is the ability to make decisions that affect interest rates and exchange rates.

That view is not as extreme as people pretend. If we are outside the single currency, we will not have complete freedom. If we are inside the single currency, we will not have total influence. We must decide whether we want some influence and very little freedom inside a single currency, or some freedom and very little influence outside it. I would choose freedom--not freedom for myself, but for a Labour Government to make decisions that affect the important aspects of economic policy.