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Mr. Bercow: Can the hon. Gentleman offer a single historical example of a single currency zone that has been formed without either formal tax harmonisation, or increased transfer payments from the centre?
Mr. Bruce: Harmonisation is not necessary. For example, it does not occur in the United Kingdom and Ireland; it does not even occur in the United States. I accept that there is an argument about transfer payments, but such payments were not made on the creation of the UK when there was a huge movement of people. However, the fact that something has not happened is not a reason for not attempting it, but then the hon. Gentleman is a Conservative and I am a Liberal: I believe in radical change and he, presumably, does not. Of course I accept that there are difficulties, but, when 11 countries have embarked on an enterprise of this type, we should not assume that it cannot happen because it has not happened before.
If the Government's true position is that they are in favour of joining a single currency, they should make that clear because that would, in itself, help to bring about a degree of convergence and enable people to start to make the preparations that the Government are urging on them, without offering them any clear timetable. It is not realistic to expect businesses to spend millions of pounds--indeed, tens of millions--preparing for something that may not happen, let alone if they have no idea when it will happen.
Sir Teddy Taylor:
Will the hon. Gentleman give way?
Mr. Bruce:
No. I want to proceed because of the pressure on time.
In the meantime, because of current problems, and as part of our preparations for eventual membership of the single currency, there is a requirement on the Government to do something to take the pressure off the hard-pressed manufacturing, farming and tourism sectors. Manufacturing faces an almost certain recession in 1999; whatever the Treasury forecast may say, that seems highly likely.
There is a discrepancy between what the Government have been saying publicly about their European economic policy and what apparently is being said on the quiet in Brussels--and not in the House. I am talking about "The New European Way"--about which I intervened in the Chief Secretary's speech--which has been published in the name of the party that calls itself the European Socialists--which I suspect sends a shudder through new Labour--but which most of us know was written by Ed Balls, although its authorship is now disowned. It was certainly put into the pot with the Chancellor's blessing and support.
Because it is a Euro-report, it contains quite a lot of mumbo-jumbo which is open to interpretation, according to people's opinions, but it addresses two crucial issues: monetary openness and fiscal flexibility, and tax harmonisation. The Tory amendment is on the mark at least in one respect: we do require a clear Government statement on those issues to the House. I accept that the Chief Secretary has gone some way towards giving us that statement, which was genuinely helpful and timely, and I commend him for his clarity. On the whole, it was also about right. It is high time that the debate centred on what the law is, rather than what certain motivated journalists wish it were, or wish people to believe it to be.
The Chancellor appears to want a more open and accountable European central bank than that set out in the Maastricht treaty. I agree that that is sensible. That is one of the reasons why the sooner we get in and can bring some influence to bear, the better. That does not mean interfering in the decisions of the European central bank, or carrying out the megaphone monetary policy adopted by the newly elected politicians in Germany--I suspect that they will learn a thing or two in a fairly short time--but it is about arguing that the British model of central bank independence, which I know does not command total support in the House, has something to commend itself to the continental model. It would provide for operational independence, but would make the European central bank much more open and accountable to public scrutiny---not open enough for the hon. Member for Hackney, North and Stoke Newington (Ms Abbott), but I am sure that she would agree that such transparency would be better than that which it offers.
I do not expect the Tories to have a view on that. Indeed, I do not know when they will review their policy given that the shadow Secretary of State for Trade and Industry has said that 2002 will be early enough for the Tories to make up their mind whether the Bank of England should stay independent. As has already been quoted, however, the shadow Chancellor has certainly said that either we should have complete political control, or the Bank should be completely independent. He has not made up his mind which, but he is wrong.
The Government have rightly been criticised for the shortness of the contracts that were given to the members of the Monetary Policy Committee. Even if it does not mean that they are less independent, it creates the wrong impression--that they can be reappointed by the same Government who appointed them in the first place. We would like that to be changed, but we need a proper balance between operational independence and public accountability.
If we could export that model to the continent, rather than take on its arrogant and somewhat bureaucratic mode, we might be doing a service to other member states, and the peoples of those member states, who feel that they have to have some input, without interfering in the way in which the European central bank works. That would increase public confidence in the belief that it would be a force for stability and low inflation, and would not compromise on the anti-inflationary drive. Some people imply that it would do the latter--usually those who do not support the idea of operational independence in the first place.
I get the slight feeling--a vibration--that the Government might like a little more fiscal flexibility, particularly with regard to borrowing for capital spending. At the moment, that is not allowed for in the stability pact, but there have been enough noises, both formally and informally, from British Government sources to suggest that the Government believe that it perhaps should be.
Alastair Campbell is on record--he is not officially a Government spokesman, but, by God, when he speaks, most people listen; I think Labour Members listen even more closely--as saying that the Government do not want any watering down of the fiscal rules. The question is: why do not the Government want any modification? Surely we should look at our model and suggest that that commends itself to the continent, and that our rule is more reasonable and more generous on the capital spending front. We should surely fight for maximum fiscal subsidiarity in Europe.
I am sometimes puzzled by the Chancellor, who makes some robust statements, echoed by the Chief Secretary today, about the need for fiscal independence, but who seems unwilling to use the very fiscal independence that he has to help to manage the economy in a way that would bring about convergence. At least he agrees that such independence should be retained.
Lloyds bank does not have any agreement regulating the borrowing of National Westminster bank; nor should it, even though one's intervention in the market affects the other. They just adjust their behaviour accordingly.
I am not suggesting that sanctions should not be imposed on countries with unsustainable debts. However, within a disciplined framework, there should be maximum flexibility, particularly for countries such as Britain that have a very low debt-to-GDP ratio. For countries whose ratio is either above or close to the limit, achieving such flexibility should be an incentive to reduce it and, in goods times, to try to get it below that limit. They could therefore achieve flexibility in a revised stability pact. I should have thought that that would commend itself to both sides of the House, as it is about allowing a more flexible approach to economic management.
It is essential that we have tax harmonisation. It is also true that our tax rates must be competitive internationally and not only in Europe. In many ways, tax competition is helpful and more appropriate than harmonisation. The Government have made it clear that they will retain the veto and use it; their intention is as clear and unequivocal as anyone could wish.
I certainly do not believe that we should be signing up to Euro-uniformity simply for the sake of it. It will have to have merit and benefits, and offer added value and added advantage. However, let us not go to the extreme that we are not prepared even to discuss it or to explore the possibility that there are tax anomalies that disadvantage us in the single market or in third markets. It really is unhelpful if, every time a sensible discussion of the matter is proposed, Euro-sceptics foam at the mouth and say, "There you go again--you're about to sell your country short." Surely we can examine whether there are ways in which we can co-operate while retaining our right not to accept imposed tax policies. If so, we must be prepared to say no.
The Government will introduce public service agreements, on which there will be an announcement sometime this month. My colleagues and I have a particular interest in such agreements, as we made a study of how one system operated in New Zealand, which demonstrated commendable aspects of performance delivery. However, I should tell Ministers that, when I spoke to politicians and civil servants in New Zealand, it was made absolutely clear to me that the system could not work without freedom of information legislation. They said that that was central to ensuring that the system operated in the open and that the public knew the basis of the agreements and bargains which had been struck.
Liberal Democrat Members should therefore like to know whether the new agreements will contain clear, concrete and measurable targets for improving public services. If so, has there been consultation on the targets? If so, what type of consultation was it? If not, will there be consultation? I believe that the matter should be open to wide consultation.
The fundamental question is why the agreements are with the Treasury. If the agreements are to be about public administration, should they not be with Parliament and the representatives of the people? What independent measures will monitor performance against contracts? How can we ensure that contracts between Ministers and civil servants are fair and equal rather than one-sided? They will have to be equal if civil servants are to fulfil the contracts honestly. What action will be taken to ensure that targets are met? In New Zealand, contracts contain an element of performance-related pay for chief executives. I feel that that should apply also to Ministers, so that the bargain is equal.
Those issues are real ones. The introduction of service agreements is a radical, very important step which could fundamentally change the way in which services are delivered in the United Kingdom. However, if they are to work, they will require openness, clear targeting, clear objectives and independent monitoring, so that everyone may know what was undertaken and of any changes.
Some of the Government's actions--some of which I have previously used as examples--would have been different if there had been agreements according to the necessary terms that I have outlined. The Prime Minister, for example, said that our priority is education, education, education. The reply should have been, "Fine; but specifically what will you do each year to deliver improvements in education? What contracts have been signed to deliver detailed action?" I say constructively--not negatively--that that type of public service agreement means something and is not mere sloganising.
Similarly, when waiting lists shot up, the Health Secretary announced on the "Today" programme that he was responsible for the rise because he had decided that he wanted to deal with accident and emergency priorities before reducing waiting lists. Regardless of whether that was the right decision, had he made a contract to deliver lower waiting lists, he would have had to admit publicly--and not after the event--that the contract had been changed, and there would have been a debate about it. Contracts seem to offer a genuine means of involving Parliament and the public in the delivery of policy. Such changes may be dangerous and uncomfortable for Government, but, if Ministers are serious about modernisation and openness in government, such radical
thinking is required. I applaud the Government's initiative on agreements, but am unsure whether it will be as radical and farsighted as the Government claim.
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