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7.30 pm
I suppose that we have to have a central bank--or do we? I confess that, sometimes, I have radical thoughts. I had them in about 1976 when I was a junior Treasury Minister. I was not sure whether we needed a central bank at all. This is far too advanced and radical for new Labour Members, so I suggest that they stop up their ears. Indeed, I see one of them doing it already.
I wonder about the European central bank. It is not going to have much effect on long-term interest rates. No central bank does any more; long-term interest rates are determined by the market. However, central banks and the European central bank know all about short-term interest rates. They know how to fix the rates to hit an inflation target or to create this nirvana of price stability. I am not sure whether global capitalism can survive price stability or zero inflation, but perhaps we should not be led into that argument now.
Why do we need the central bank--those 10 men sitting there trying to fix an interest rate for a region stretching from Merthyr Tydfil and Rhymney, or west Wales, almost to the Arctic circle? Poor old Eddie George is having problems fixing an interest rate for Britain. If there is growth in the south-east, apparently, interest rates have to go up, but there is no growth in Merthyr Tydfil and Rhymney or in Llanelli, so how do we compensate for that? Why cannot Llanelli have a lower interest rate than the City of London?
How do we fix one interest rate for the whole of Europe? It is absurd to establish a body that apparently has all the powers and is an institution. It is like the
European Court of Justice. It is not like the little committee that has been set up--I do not know where--to deal with employment, but is a joint committee of the Council of Ministers and the European Parliament. It will consider guidelines and consult the Committee of the Regions, and spend a lot of money doing nothing.
We had the European Commission, the European Parliament and the Council of Ministers--the troika of the European Union--and now we have a fourth: the European central bank. It is a troika plus one. This new institution will determine interest rates--and employment levels--and it cannot take into account other matters such as employment because the treaty says clearly that it cannot.
The Maastricht treaty says:
If Governments cannot achieve that aim, I would leave it to the marketplace. Some of my hon. Friends may be upset about that, but that is what I would do. Governments have to face the retribution of the electorate. There is retribution, they tell me, in the marketplace as well if we get it wrong, but the gentlemen in Frankfurt driving around in large cars, on eight-year contracts and an index-linked pension, are going to face not retribution, but a nice retirement after they have decided who has a job and who does not in the European Union.
Mr. Llew Smith:
May I use an argument that my right hon. Friend made some weeks ago, but in another instance? If we have no confidence in politicians setting interest rates or public expenditure levels, and if that is now to be the responsibility of the European central bank, why do we stop there? Why do we not give it powers to determine taxation levels, what sort of health and education service we have, and how much we should invest in the social services?
Just a week ago, we celebrated the centenary of one of my predecessors, Nye Bevan. Politicians from left, right and centre were queuing up to say what a wonderful man he was, which he certainly was, but do we honestly believe that a European central bank would ever have had the courage, imagination or initiative to set up the national health service?
Mr. Davies:
My hon. Friend is right. I shall not follow him, as I can see that the occupant of the Chair is getting restive, but obviously there are possibilities. Once we have a central bank, we have an Exchequer board to determine public expenditure levels and taxation. Perhaps we saw the germs of that now in the statement of my right hon. Friend the Chancellor of the Exchequer the other day.
In his excellent speech, my hon. Friend the Member for Merthyr Tydfil and Rhymney mentioned corporatism, perish the thought. We old Labour Members in the
previous Labour Government were accused of terrible corporatism, and we are still accused of all sorts of things: running the economy badly, being too corporatist and everything else. Fair enough: we accept those criticisms. We are now supposed to be living in a flexible world, a global economy, yet we belong to the European Union, one of the most corporate structures--I hate to say it again--since the Holy Roman empire. It is utterly and completely corporatist. It is there to determine, with institutions, treaties, words and lawyers, almost every facet of life--certainly of economic life. What can be more corporatist than that?
My hon. Friend the Minister often goes to Brussels and sits in this corporatist body, as do other Ministers and the Prime Minister. We are members of a large corporatist organisation, and I wonder sometimes whether this old-fashioned, indeed out-of-date, corporatist organisation can live with the global economy. I am not sure that it can. Something will fall apart, because it is the antithesis of the global economy.
Whether we like it or not, the global economy is there, yet we have this old structure--I am prepared to admit, this old Labour structure--in the centre of Europe to which we all subscribe and pay money. However, outside there is another world: the global economy, where Governments have to move quickly and be flexible, and where constitutions have to be flexible.
The good old British constitution fits well into the global economy. We are trying to dismantle it, but it suits that economy. This stuff that we are debating does not suit it, and I suspect that the treaty will not be able to cure unemployment and do the things that everyone wants. I suspect that the European central bank, price stability and all this nonsense will lead to deflation. Perhaps we shall have zero inflation, but if we do, even more than 18 million will be unemployed in Europe.
Mr. Jenkin:
I do not intend to detain the Committee for long, because I want to ensure that we debate as many amendments and clauses as possible before the Government bring down the guillotine.
I had meant to talk about the European Court in conjunction with article 1, and about the importance of the amendments relating to the further centralisation of power; and I had meant to ask the Minister to clarify one part of the Government's policy. Are the Government in favour of the development of a federal Europe, or are they not? That is not a difficult question, and we need not get bogged down in arguments about what a federal Europe is. Some say that federalism is about decentralising power, but, if we started with that premise, we would not have moved any power from the member states to the federal institutions in the first place.
It is, of course, possible to centralise a certain amount of power in the institutions. Indeed, it was originally intended that the Community should take sovereignty from the member states in limited areas for the achievement of certain limited objectives--and it must be said that the European Economic Community, as it was then called, used to work extremely well on that basis. The objective of the single market was to consolidate the process, with the transferring of limited fields to the institutions to achieve free movement of goods, capital, people and trade within the single-market area.
The question that needs to be asked is whether the Government want the process to continue indefinitely, because that is what the European Community institutions
are now involved in. The inclusion of the Amsterdam treaty in the treaty on European Union gives the process a considerable further kick in a federalist direction.
Let me ask the Government a simple question: are they in favour of an indefinite and continuing transfer of power and responsibility from the member states to the institutions of the Community? It seems from the fact that they have signed the treaty, and from the fact that they have addressed none of the issues raised by my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) about the operation of the European Court--the Conservative Government were going to insist on that--that this Government are indeed prepared to continue the process indefinitely.
It should be understood that it is not necessary to go on changing the treaties for that process to continue. May I detain the House for a moment to explain the doctrine of the occupied field? Every time a new directive is created or a new regulation is created and approved, the Community removes further competences from the member states, and centralises decision-making in European Community institutions.
"The primary objective of the ESCB shall be to maintain price stability. Without prejudice to the objective of price stability"--
this is good draftsmanship--
"the ESCB shall support the general economic policies in the Community".
The general economic policies are that we should have high employment, but it cannot take that into account, whatever that means, because it has to determine price stability, which is zero or close to zero inflation, so why on earth do we need it?
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