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Mr. Iain Duncan Smith (Chingford): As the hon. Gentleman has touched on the moment when we left the exchange rate mechanism, will he clarify on the record exactly what his colleagues' position was at that time? Did they want us to stay in the ERM or to leave; to hike interest rates or to lower them? It is important to get that on the record.
Mr. O'Brien: As I have just said, that is history. Our view was that, if we were going to enter the ERM,
we should do so at a sustainable level, for the right reasons and at the right time. The then Chancellor, who is now the Prime Minister, decided to enter for the wrong reasons, at the wrong time and at the wrong exchange level. He decided to enter because, as everybody knows, he had managed to convince the then Prime Minister, who was on her uppers, to accept entry.
That was the political reasoning behind the economic judgment. The decision was made not in Britain's economic interest, but through concern about the future of the Conservative party. That is how economic policy and European policy have been approached in the past decade.
Mr. Tony Marlow (Northampton, North)
rose--
Mr. Richard Shepherd (Aldridge-Brownhills)
rose--
Mr. O'Brien:
I know that many hon. Members want to speak, so I will give way once more to the hon. Member for Aldridge-Brownhills (Mr. Shepherd).
Mr. Shepherd:
Does the hon. Gentleman not recall that the entire leadership of the Labour party at that time, including the late lamented John Smith, passionately believed in membership of the exchange rate mechanism? At the time of the difficulties caused by the rate, the Labour party passionately espoused our continued membership, and argued that interest rates would go up if we left. That time should be remembered in that context. Members of the Labour party are the greatest arguers now for entry into a form of ERM that would be set in concrete--monetary union.
Mr. O'Brien:
The hon. Gentleman should remember that the leadership of his party said that sustaining membership of the ERM at the rate in question was the basis of its whole economic strategy, and it failed. The economic strategy on which the Tories went to the country in 1992 failed a few months later. It failed in many ways. Yesterday, the Library published an interesting and amusing snapshot analysis that showed that Britain would not hit the criteria for monetary union. It suggested that only Luxembourg and Ireland are on course for a single currency. Some single currency.
The Government have made great claims for their economic performance in their attempts to meet the Maastricht criteria. The reality is different. On inflation, last year we were 11th out of 15 in Europe: we were in the bottom half, and below the European average. On gross domestic product per person, we were ninth in Europe. On growth, between 1979 and 1995, we were 13th in Europe. On industrial production, in the same period, we were 12th out of 14 countries. On investment, we were at the bottom. Indeed, for the first 14 years of Tory government, we were at the bottom of the Organisation for Economic Co-operation and Development's league of 25 countries. On interest rates, we were 11th. On unemployment, we were eighth out of 11.
The Prime Minister promised to make Britain the enterprise centre of Europe. Like his promises on tax, that promise has been broken. A recent report by economists Ray Barrell and Nigel Pain shows that foreign investment
in France, between 1991 and 1995--the period that the Government like to look at--was $19 billion, or £12 billion, compared with Britain's $17 billion. At the same time, British firms invested $25.4 billion in Europe and abroad, making Britain a net outward investor. France, with the social chapter and an increased minimum wage, was more attractive than Tory Britain to many foreign investors.
The divisions in the Conservative party mean that it is incapable of advancing Britain's national economic interest. The Tories have failed on the economy, and have failed to get the best deal in Europe. The civil war in the Tory party means that it has put at risk the 3.5 million jobs and the huge investment that depend on our membership of Europe.
The re-election of the Conservatives would bring an influx of more Euro-sceptic Members to continue the civil war over Europe, and the victim would be British interests in Europe. Some Tories have gone dangerously far. For many of today's Euro-sceptics, being pro-British seems to mean being anti-European. They seem to think that, if someone is pro-European, he is un-British. Their rhetoric continually assails EU institutions as some sort of doomed failure. How can we make Britain successful in Europe when the Conservative Government continually undermine our involvement?
Euro-sceptics in the Conservative party seem to be of two sorts: those who plain do not like Europeans and want Britain to be detached and isolated; and those who regard the European Union as a free trade area, want no further integration, and want Britain to move from being a close participant to being a loose associate. Both aspirations are unrealistic.
In the modern world, nations are more interdependent than independent. Trade between nations is increasing at double the rate of growth among nations. The idea that Europe's future lies in a loose free trade area was the illusion of the 1950s. We had to admit that it did not work, and we traded in membership of the European Free Trade Association for membership of the Common Market.
Mr. Christopher Gill (Ludlow):
Will the hon. Gentleman give way?
Mr. O'Brien:
I shall not, because many hon. Members wish to speak. I have already given way twice. It would be better if hon. Members sought to catch the Chair's eye in due course.
We traded in EFTA membership for the Common Market because EFTA alone was not working. Today, the European single market goes beyond a free trade area. It includes policies for social cohesion that make it acceptable. It has a co-ordinated external policy that gives us clout in world trade negotiations. It gives us a common competition policy and standards of safety that benefit working people. Moving from full participant to loose associate would deter inward investment, prejudice our position in financial services and harm the City of London.
Many in the Conservative party are seeking to repeat Labour's mistakes of 1983. Then it was suggested by the Confederation of British Industry that Labour's policy of disengagement would put 2.5 million jobs at risk. That was when 44 per cent. of our exports went to our
European neighbours. Our trade and jobs links to the EU have increased: more than half our trade and 3.5 million jobs would be put at risk by the policy of a Euro-sceptic Conservative Government.
I am sure that the Chancellor of the Exchequer shares our view that the Euro-sceptics in the Conservative party are job destroyers, who would put at risk British business relationships with Europe. Continued EU membership is essential for open access to Europe's markets. Leaving would horrify our business community and create new obstacles to European markets. It would cause job losses and shrinkage of inward investment. Being pro-British does not require us to be anti-European, but it can require us to lead in Europe for Britain.
The prosperity of Britain depends on the skill of its Government in making a success of our membership. We export more goods to Germany than to the United States or Japan; more to Holland than to all the new economies of the far east. Britain's membership of the largest, most prosperous market in the world gives us powerful leverage in trade negotiations with the rest of the world that we would not possess in isolation.
We can get more out of the European Union by co-operation than by confrontation. We cannot be a success in Europe if we reduce Britain to the margin of the debate and become hecklers from the sidelines. That is why the bosses of Unilever and Toyota are so concerned about the lurch to anti-Europeanism in the Tory party. Niall FitzGerald of Unilever said that continuing the current negative approach to Europe would lead to
Our relations with our European neighbours are in crisis because there is a crisis of leadership in the British Government. The Prime Minister and Cabinet repeatedly give priority to pandering to the prejudices of their party rather than to serving the interests of British business or the British people. That is why both the people and business are realising that they would rather trust the judgment of a Labour Government, based on a hard-headed assessment of economic reality, than risk being taken by the Conservatives down a path dominated by hysteria and prejudice. So concerned are they that they see the internal civil war in the Conservative party becoming much worse if the Government are re-elected to a fifth term.
"reconsideration of certain investment decisions. If the UK was gently floating off into the Atlantic, we'd have to reconsider things."
In the modern high-tech, fast-moving global economy, the Conservative world is still rooted, in many ways, in the model of independent nations that belongs to the last century rather than the next. In their hearts, many Conservatives know that; certainly the Chancellor of the Exchequer knows it. I thought that the Prime Minister knew it. Before the Euro-sceptics put an armlock on him, he began this Parliament by saying that it was wrong for Britain to stand on the outskirts of Europe as an island tossing bricks into it. Today, he is finishing the Parliament trying to prove that he is better at tossing bricks than the hon. Members for Billericay (Mrs. Gorman) or for Stafford (Mr. Cash).
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