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10.51 am

The Economic Secretary to the Treasury (Ms Patricia Hewitt): I congratulate the hon. Member for Twickenham (Dr. Cable) on his success in securing the debate, and on his thoughtful speech. I also congratulate my hon. Friend the Member for Rotherham (Mr. MacShane) on his witty contribution, which was, as he pointed out, entirely on-message. My hon. Friend the Member for Redditch (Jacqui Smith) made an intelligent speech, especially from the perspective of the business community. It was also interesting to hear a contribution--albeit somewhat confused--from a representative of the anti-European Conservative party.

The issue of British participation in the single currency is the most important issue with which the country is likely to deal for a generation. That is why, on taking office, the Government resolved to end the indecision and divisions that have isolated us from the debate in Europe, and sidelined our national interest. That is why,

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in October 1997, my right hon. Friend the Chancellor set out the Government's clear policy, a policy reiterated last week by my right hon. Friend the Prime Minister. We intend to join a successful single currency if it is in the country's economic interests. That remains our policy.

The hon. Member for Twickenham suggested that the Government should instruct the Monetary Policy Committee to take convergence into account, even if that meant, in certain specific circumstances, having to pursue a target contrary to the inflation target that is the committee's remit. Let me draw the hon. Gentleman's attention to the success of the new monetary framework that the Government have created. It has delivered falling long-term interest rates--they are now only 0.5 per cent. higher than those in the euro zone--and the lowest mortgage rates for 30 years.

We believe that the primary objective of the Bank of England must remain the delivery of price stability, as is clear from the inflation target that we have set for it. That is the Bank's responsibility, that is what British interest rates are intended to deliver, and that is what they should continue to deliver. It would be extremely foolish to confuse that inflation target with a different target, whether by reference to a general convergence target or, more specifically, by reference to an exchange rate target or exchange rate zones. That would remove the predictability and transparency of our new monetary policy framework, and would undoubtedly reduce its effectiveness.

Similarly, if--as some have suggested--we tried to shadow the interest rates of the European central bank, it would mean accepting a monetary policy that was right for the euro zone, but not right for the United Kingdom; and that would lead to more instability, not less.

The hon. Member for Twickenham referred to the structural differences in the housing market. Differences indeed exist in the housing market, and in the nature of housing finance: we pointed that out in the Treasury report on convergence. I stress, however, that the trend in the British housing market is now towards a much greater use of fixed-rate mortgages, whose advantages the hon. Gentleman rightly emphasised. The fact that 50 per cent. of new mortgages are being taken out at a fixed interest rate reflects the lower inflation expectations and the consequent lower risk now associated with fixed-rate mortgages. It also illustrates the success of our monetary policy framework.

Mr. Alan Clark: I thank the Minister for giving way. That contrasts with the behaviour of some of her hon. Friends.

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In her lucid and articulate exposition of the reasons for not shadowing the euro, the Minister defined precisely the reasons for not entering the euro. Was that a slip on the part of whoever wrote the speech for her?

Ms Hewitt: The reason why we should not shadow the euro, and the reason why we should seek to shadow the interest rates currently set by the European central bank, are exactly the reasons why we should not enter the euro at this stage. To do so would not be in Britain's interests, because it would mean setting an interest rate designed for conditions in Europe, not those in Britain. That is why we will enter a successful single currency only if there is a sustained and settled period of convergence, and if doing so would be good for the British economy and British jobs.

Mr. Bercow: Why does the Minister say that the Government do not propose to shadow the euro, when they have signed the treaty of Amsterdam, article 121of which specifically requires that shadowing? The Chancellor's advisers know that; Gavyn Davies and the responsible European Commissioner know it. Does the Minister not know? If she does not, why does she not admit it?

Ms Hewitt: The condition required for entry into the euro is a period of exchange-rate stability, and our policy is for a stable and competitive exchange rate. We shall not achieve that by targeting a particular exchange rate; we shall achieve it on the basis of sound economic fundamentals. That is why our economic policy is designed to secure low and stable inflation, steady and sustainable growth, and sound public finances.

The Luxembourg European Council stated that, in general, exchange rates should be seen as the outcome of other economic policies. That is precisely the Government's view, and that is why we are not pursuing the suggestion of the hon. Member for Twickenham.

I am sorry that, given the time allowed and the number of interventions, I have not been able to deal with all the points that have been raised; but I assure the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) that it is far more sensible to spend now, in preparation for possible entry to the euro. As Derek Wanless, the head of NatWest, has said, the longer the time that we have, the less it costs, because the costs of preparation for a possible eventuality are built into the on-going project.

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British Film Industry

11 am

Mr. Tom Clarke (Coatbridge and Chryston): I begin by declaring an interest, as already recorded. Specifically, since 15 February this year, I have been non-executive chairman of Spring Studios. More generally, my interest in film goes back a long time. Since the House returned from the summer recess, I have been trying to obtain this debate because of that long-standing, passionate and professional interest in film.

Before I came to the House in 1982, I had spent most of my working life as an executive with the Scottish Film Council, and I had the privilege of serving later as a governor of the British Film Institute, under the chairmanship of Lord Attenborough. It was with real delight, therefore, that I heard that the House would have a chance to discuss the future of the British film industry.

I look forward to speeches from hon. Members on both sides of the House, and especially from the Minister for Tourism, Film and Broadcasting, whom I congratulate warmly on her appointment. She used my parking space for many years and, in the unlikely event of my driving in London--something I have never done--and thus spreading terror throughout the metropolis, I am sure that she would reciprocate.

The House will know that the Government's review of the film industry, "A Bigger Picture", was published in March last year. It was co-chaired by Stewart Till, president of Polygram Filmed Entertainment, and myself. If I may say so, it was described by the Financial Times as

It was, I believe, a testament to the excellent work done on the review by all who contributed to it.

We had an expert team to work with us on the review--a team which covered every aspect of Britain's film industry and film culture, with every kind of company, from the smallest independent to the largest corporation, drawn from every part of Britain. The findings of the group were eagerly awaited not just in the UK, but in Europe and across the Atlantic. The review group was set key objectives by the Government, which were announced in Cannes days after the election by the Secretary of State for Culture, Media and Sport.

The crucial challenge was how to ensure that the flow of quality British films reached our audiences. Specifically, one of the key objectives was to double the market share of British films. Thankfully--and in full accord with the new Labour style of government--the objective was realised during the months in which the report was compiled. The share of domestic box office taken by British films did double--in large measure due to the extraordinary success of films such as "The Full Monty". However, that vintage year also contained "Shooting Fish", "Mrs. Brown", "Bean", "The Borrowers" and "Brassed Off". Speaking personally, I had a high regard for "Brassed Off", which deserved even more success. That may be because my father was a miner rather than a stripper, and I still have many ex-miners in my constituency.

By March 1998, as the review indicates, the audience share for British films had risen to 23 per cent. However, with the most recent figures showing that it is down to 14 per cent., there is a danger of boom and bust--a worry

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for my Front-Bench colleagues. Evidence of our talent became apparent again when, this year, "Elizabeth" received seven Oscar nominations, and "Shakespeare in Love" received 13. In this week's BAFTA nominations, the films picked up 28 nominations between them.

All that is welcome, and it confirms what we already know--that our movies are capable, without compromising their individuality, of attracting huge audiences at home and abroad. The successes show that we have real genius in this unique area where culture and commerce meet. I have always believed that we can build on those talents to a far greater degree, and produce a truly creative, integrated and robust British film industry.

Despite our talents and their considerable success, we must acknowledge that that success is precarious. There is no doubt that we have some of the most gifted film makers in the world, but we do not have enough of the structures in place--something which is crucial in today's modern, global enterprise economy. We must ensure that we sustain and improve on our success, year on year.

Despite our recent achievements, we are, to say the least, in the questionable situation where there is no guarantee that revenues from British success stories will be reinvested in the production of more British films. We need only look at the excellent "Four Weddings and a Funeral", which is still the biggest-grossing UK film world wide. Its producer, Duncan Kenworthy OBE--as of yesterday--made a sterling contribution to the review. We wish him well with "Notting Hill", the film he has just completed. I am sure that he will continue to inspire others to invest and support this creative industry.

We desperately need the modern companies and business skills that could enable more of our film makers to make bigger and better pictures that get on more screens in Britain and around the world. Far too often, the vision of a renaissance of our film industry has been waved before our eyes, only to be replaced with broken dreams and dashed hopes. Plainly, the industry in Britain has structural weaknesses which prevent it from reaching its full potential, as a comparison of the US and UK industries demonstrates.

The US film industry is undoubtedly extremely successful. However, when we share the same language advantage as the US and when our film makers are acknowledged to be some of the most creative in the world, we must ask why the British film industry does not perform as the American industry does. "A Bigger Picture" showed that there are massive differences in structure between the US and UK industries.

The US industry is dominated by distribution-led integrated companies, where the processes of development, production acquisition and distribution are financed and carried out by a single entity. They believe that vertical integration is the right approach. By contrast, the UK industry is fragmented, and sometimes gives the impression that it lacks the ambition to change. The production process is separate from the distribution process, which is dominated by big US companies. In Britain, most producers have no close relationship with their distributor, and often have to sell all their rights for their films to be distributed.

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