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5.57 pm
Mr. Giles Radice (North Durham): I am glad to follow the hon. Member for Louth and Horncastle(Sir P. Tapsell), who always speaks with great style and brio. Indeed, he made a much better speech, or certainly a much more thoughtful speech, than the shadow Chancellor.
Dr. George Turner: Not very difficult.
Mr. Radice: Being a naturally polite person, I would not put it like that, but I congratulate the hon. Member for Louth and Horncastle on his speech although I do not agree with some of his views, as he knows. However, I agree that this Queen's Speech takes place against an uncertain world economic situation after the events in the far east and Russia, although it is perhaps slightly less uncertain than it was a month ago, thanks to decisive action by the Federal Reserve. In his praise for the Federal Reserve, I agree with the hon. Gentleman.
The world economic situation creates difficult problems for all western policy makers, but it is a particular problem for the United Kingdom given the fact that we were already deliberately slowing down our economy because of the dangers of overheating when we first came to power. The trick is to continue that slowdown without tipping over into recession.
The Opposition charge is that the pre-Budget report is far too optimistic in its forecasts and has left a black hole in public finances. No serious commentator agrees with the black hole argument; forecasts are always slightly suspect because no one knows the future, although I note that the Bank of England forecast is almost the same as that of the Government. Also, the Monetary Policy Committee has cut interest rates, for which it is to be congratulated. Incidentally, a distinction must be drawn between the Bank of England and the European central bank, in that the former has an inflation target and, if there is a danger of undershooting the target, the MPC is obliged to cut rates. That provides some defence against a recession, which I do not think that the hon. Member for Louth and Horncastle acknowledged.
It would be absurd for the Government to start to cut public spending on the flimsy ground that they got their forecast wrong. No responsible Government would do that. It is precisely when the dangers of recession are evident that public spending should not be cut. On the contrary, the automatic stabilisers must be allowed to work. The Government are following a sensible policy. With luck and good judgment, we will manage to avoid a recession in this country.
I agree with my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), with whose speech I concurred almost completely, that the big economic event--only a month away--is the coming of the euro. The euro is enormously important not only for the 11 members who are joining in the first wave but for
the United Kingdom, which is staying out for the time being. We may have decided not to join the euro for the moment, but there is no way in which we can keep the euro out of the UK. That is the reality. It is bound to impact, one way or another, on the value of sterling. So far, sterling may have benefited from being used as a hedge against volatility in the euro, but if--as many people, including the Governor of the Bank of England, believe--the euro proves to be a strong and stable currency, sterling may experience a bumpy ride, going down as well as up. We do not know what will happen to the pound, but it could well be volatile.
There is also the impact on business. The Government are right to stress the need for preparation. Earlier this year, the Treasury Select Committee held hearings on the preparations for economic and monetary union. My hon. Friend the Member for Bolton, West (Ms Kelly), before she was translated into a Parliamentary Private Secretary, was there. Leading British firms such as ICI, British Steel and Vauxhall told us how they would be using the euro widely and expected their suppliers to do likewise. As Dr. Sykes of ICI told us,
Of course, there will be a major impact on the City. As I learned from the Bank of England's third euro symposium at the end of October, the City believes that it is ready for the coming of the euro. It expects to become the
I strongly support the Government's changeover plan, which will be published in the new year and will set out for business the steps that need to be taken to prepare for entry when we decide. The Government's policy of prepare and decide is a vast improvement on the wait and see of the Tory Government, let alone the 10-year delay of the Tory Opposition. The question is whether the Government's policy goes far enough.
Business leaders have told me and others that, although they much appreciate what the Government are doing, and although some are prepared to go ahead on the basis of risk, they would much prefer, and would welcome, a clearer sign than the Government have given so far that they will decide to join the euro once economic convergence is achieved.
Ms Abbott:
Does my hon. Friend think that the Government's timidity about going into economic and monetary union is based on a technical objection, or on being terrified of the Murdoch press?
Mr. Radice:
I think that the five conditions are very important, but it is also clear that the Government are realistic: they have to win a referendum. They must be certain, or pretty certain, before they call it that they will win it. That is only common prudence, because it would be a disaster not only for the Government but for the country if it were lost.
At the beginning of last week, more than 100 business leaders, from firms whose turnover represents more than
a quarter of gross domestic product, signed a statement in the Financial Times. They concluded:
On Monday, the officers and members of the advisory committee of the European Movement--including the hon. Member for Esher and Walton (Mr. Taylor)--the all-party group that was founded by Winston Churchill, of which I have the honour to be chairman, published a letter in The Independent. Its concluding paragraph stated:
In the concluding part of my speech, I want to comment on tax, because we have heard some extraordinary scare stories on it in the British press, and an echo of them from the shadow Chancellor this afternoon. To believe what we read in the Daily Mail, The Daily Telegraph or The Sun, we would have to believe that the British will have to put up their income tax at the behest of Brussels, that the UK is forced to put VAT on children's clothes, food and newsprint and that it is forced to adopt German rates of corporation tax. I need not bother to comment on the income tax scare, because no evidence whatsoever has been produced for that.
Mr. St. Aubyn:
I am grateful to the hon. Gentleman for inviting evidence on the fact that income tax would have to go up. Is he aware of the publication "UK Economic Prospects", printed last December by Oxford Economic Forecasting, based on a well-known economic model? It said that income tax would have to rise if we entered the single currency.
Mr. Radice:
That is a prediction by a forecasting body, and good luck to it. It is not a firm proposal from Brussels or anyone else.
Mr. Cash:
Will the hon. Gentleman give way?
Mr. Radice:
No. The hon. Gentleman has not been sitting in the body of the kirk and he came in late. On that basis, I am not prepared to give way to him.
It is worth commenting on The Sun story on VAT, which was a collector's item, because newspapers should not be allowed to get away with barefaced lies. I realised that even The Sun knew that it was treading on thin ice when its political editor, Mr. Trevor Kavanagh, was sent to make the rounds of the television studios last night. If the going gets rough, "Send Kavanagh" seems to be the newspaper's line. Its headline yesterday was "Euro tax on kids' clothes--We reveal secret VAT stitch up." It said:
"Euro liquidity will naturally spread throughout the economy".
That will happen whether people like or not.
"international financial centre for the euro".
The euro is that important for us.
"Britain's best economic interest is likely to involve joining soon after EMU is established, and the best policy for Britain is one based on the assumption that we will join".
Since then, a further 150 business leaders have signed the statement.
"The best course for our country is to prepare now to be able to join EMU when the economics are right. The government's policy of commitment in principle to UK entry is welcome. We now need an unequivocal statement by the government of its intention to join EMU as soon as proper convergence of our economic cycles is achieved, matched by an assurance that pursuing such convergence will be a key element of domestic policy in coming years."
We are not asking for a specific date but, like my right hon. Friend the Member for Ashton-under-Lyne, we ask the Government to move from if to when.
"The tax grab plan was signed and sealed behind closed doors at the 1996 EU summit in Dublin . . . and Britain must agree if we join the single currency. The scheme is spelled out in EC document (96)328. The Sun has seen a copy."
1 Dec 1998 : Column 719
So have I.
It is hardly surprising that The Sun has seen a copy, because the so-called "secret" VAT document was a Commission White Paper published in 1996. Perhaps it was not brought to Mr. Kavanagh's attention then. Obviously no one told him that the proposals in the document were not accepted by the Council of the European Union.
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