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Mr. Dennis Skinner (Bolsover): Will my right hon. Friend accept from me that it is not a good idea to catch the first train that leaves the station as it might be run by Branson and get you nowhere? Does he accept that the issue of the Common Market and the European Union has blighted every Government for the past 30 years? He is right to be careful about the progress that is being made at this time. When the previous Government decided to join the exchange rate mechanism last time and we were taken in by the previous Prime Minister but one, wonderful, meticulous preparations had been made. However, notwithstanding that, 16 September 1992 ended in a calamity for Britain--£10 billion was lost, the Prime Minister was locked in a lavatory and the Chancellor of the Exchequer was running about trying to find a portable radio to discover the Financial Times index. I hope that that will be etched in my right hon. Friend's memory. Although he is not catching this train, he wants to be careful about catching the next one.
Mr. Brown: It is precisely because of the danger of making economic decisions on political grounds that we are going to be absolutely careful, both about the preparations to make a decision on monetary union and about insisting
that the economic tests are met. When my hon. Friend looks at the documentation provided he will see that in relation to the business cycle, flexibility, employment and investment, we must be satisfied that the economic tests that we have set down for both convergence and sustainable monetary union are met. It is part of my job at the Treasury to ensure that.
Mr. John Butterfill (Bournemouth, West): I wish to question the right hon. Gentleman on convergence, particularly the convergence of interest rates. He has said today that interest rates in this country are more than double those in continental Europe. There clearly needs to be convergence before we can enter and it is also clear that it is fairly unlikely that interest rates on the continent will rise significantly over the intervening period. Is the right hon. Gentleman giving a commitment today that there will be a progressive reduction in British interest rates? Is that his policy as from today? If so, how will he deal with the problems of inflation? Will he reduce public expenditure or increase taxation?
Mr. Brown: The hon. Gentleman should understand--I hope that he does not misunderstand this--that there is no weakening of the inflation target. I have said that if we can make a success of our economic reforms, over time I should like to reduce the inflation target. It is precisely because interest rates have diverged--in Britain, to deal with an incipient inflationary problem that we inherited from the previous Government--that it is not realistic either to enter in 1999 or to make a decision to enter by the end of this Parliament. The aspects that the hon. Gentleman mentioned in relation to convergence are not only making progress--our institutional reforms in the Bank of England to get control of inflation and our fiscal deficit reduction plan to get control over public borrowing are essential in the national economic interest. That is the policy that we shall pursue.
Mr. Robert Sheldon (Ashton-under-Lyne): Now that the decision has been taken, is my right hon. Friend aware that we must avoid any parallel with the situation 40 years ago, when we failed to become a member of the Community, and accepted disadvantageous conditions on our subsequent entry? I would like to ask one question in particular: how will he deal with the danger of decisions crucial to us being taken against our own national interest?
Mr. Brown: My right hon. Friend, who has taken a great interest in these matters over time, ought to be reassured about two things. First, our statement of principle today--the first statement of principle on a single currency made by a British Government--will send a signal to our continental neighbours that we are serious about the project. Secondly, I am determined that economic decisions are made in the ECOFIN Council--the Council of Finance Ministers--and I will continue to make proposals to ensure that that is the case.
My right hon. Friend is absolutely right to say that we missed opportunities in the past; we must not miss opportunities again, but we must make sure that, in seizing the opportunities available, we are sure that the economic benefits can come to this country and sure that the economic tests that we set down are not passed over to meet an artificial timetable, but are actually met.
Mr. Robert Jackson (Wantage):
I agree with the Government that popular consent is necessary before we
Mr. Brown:
I said that it was the policy of the Government to put us in a position where a real choice, after preparations had been made, could be made early in the next Parliament. That is based on our assessment of the economic difficulties and the problems of preparation that we must now face. I said that there would be a referendum at that time if the Government made a recommendation and if Parliament so decided.
Mr. Austin Mitchell (Great Grimsby):
I congratulate my right hon. Friend on his statement. I am delighted that he has placed so much emphasis on participation in a successful monetary union, because it will not be successful. It would be a mistake to rush to buy a non-flying pig in a deflationary poke.
As the attempt to go into monetary union in Europe--even if we are not going to be part of it--will cause uncertainties, what are my right. hon. Friend's plans for these foreseen circumstances? First, there is the uncertainty as to whether or not monetary union takes place. Secondly, there is the uncertainty about whether it is a hard or a soft euro and a wide or narrow monetary union. Thirdly, there is uncertainty created by what amounts to a speculators' charter, like the ERM, once rates are fixed before the euro emerges in 2002. The danger is that all that will bring a flight of funny money from Europe and its uncertainties into the pound to push sterling higher. How can we cope with that?
Mr. Brown:
My hon. Friend should bear it in mind that one of the purposes of a common currency is to avoid systematic currency speculation between 15 or a number of different currencies on the European continent, and that, in the long term, the development of a single currency would work against the speculators and not in their favour. He is right to say that a time is needed to assess how monetary union is working, as well as a time for preparation for Britain. I hope that he will agree that that is what we are doing.
However, I challenge my hon. Friend's analysis that our economic policy in Britain is in any way being imposed by policies from other parts of Europe. The decisions we have made on interest rates and public borrowing are the decisions that are right for Britain. We must get away from a situation in which we have a stop-go economy--where, every time we expand, inflation rises, we have to cut back, and we end up with the boom and bust cycle that caused so much damage during the Conservative years. It is to get away from Conservative instability that we have put in place the policies we have.
Mr. John Swinney (North Tayside):
The Chancellor has laboured the points on convergence, and they are obviously important, but does he recognise the concern felt in the Scottish economy about the fact that the interest rate policy being pursued by the Bank of England and the Government is higher than is required by the Scottish economy, which is not experiencing the overheating seen in the economy of the south-east of England?
There would be many economic advantages to exporters and the Scottish business community from earlier entry into a single currency. What would the Chancellor like to say to those in the business community in Scotland to enhance their preparations for the single currency and to give them any more certainty than ever existed when the Conservatives were in power?
Mr. Brown:
I am not sure whether the hon. Gentleman wants separate currencies in the United Kingdom or a single currency in Europe--he is not absolutely clear about what his policy is. However, I can tell him that this Government's policies to tackle the problems of unemployment in Scotland and the problems that cause unemployment, which include the lack of skills in Scotland, and to deal with some of the structural problems of the Scottish economy are the policies that are best suited to getting people in Scotland back to work.
Mr. Martin O'Neill (Ochil):
In stating the criteria very clearly, my right hon. Friend also made the point that it is important that we get it right, rather than that we go in quickly. Will he bear in mind the fact that, for some industries in this country, and some people whose jobs depend on those industries, the prospect of not going in quickly presents great difficulty, because we are labouring under the problems of an overvalued currency and fluctuating interest rates? In getting it right, will he make sure that not too many jobs are lost too quickly as a consequence?
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