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National Health Service

2. Mrs. Caroline Spelman (Meriden): What discussions he has had with the Secretary of State for Health on the implementation of the national changeover plan within the national health service. [130129]

The Financial Secretary to the Treasury (Mr. Stephen Timms): The implementation of national changeover planning in the public sector is overseen by a committee of Ministers, which is chaired by my hon. Friend the Economic Secretary, who is attending today's European Union Budget Council. The interests of the NHS are represented on the committee by the Under-Secretary of State for Health, my noble Friend Lord Hunt.

Mrs. Spelman: The Government pledged to make savings of £100 million on NHS bureaucracy. Will the Financial Secretary confirm that nearly all of that will be negated by the national changeover plan?

Mr. Timms: No. That is certainly not the case. All parts of the public sector need to undertake analysis and planning for the possibility of UK entry to the single currency. If there is a clear and unambiguous economic case for Britain to participate, we want to be able to do so. The work being undertaken by NHS trusts is a small task and can be managed well within existing resources.

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There is a proposal floating around which should worry the hon. Lady very greatly, given her concern--which I know is genuine--for the health service, and that is her party's policy to make £16 billion of spending cuts.

Savings

4. Mr. Ian Bruce (South Dorset): What his policy is on encouraging people to save. [130131]

The Chief Secretary to the Treasury (Mr. Andrew Smith): We are extending opportunities to save through our policies for a stable, low-inflation and growing economy, with rising real living standards, and through the extension of the 10p rate of tax, the success of individual savings accounts and action to tackle financial exclusion.

Mr. Bruce: I am sure that the House will be surprised that the Minister did not actually say that the Government have no policy to extend saving, as the savings proportion of people's income has gone down from 10.6 per cent. to 3.8 per cent.

Can the right hon. Gentleman perhaps tell the House something that might be simpler for him to explain? Every year £5 billion pounds is now being taken out of people's pensions and the pensions of future pensioners. How much is that contributing to the enormous slash in the amount that is being saved by the nation?

Mr. Smith: As the hon. Gentleman should well know, the dividend tax credit was ended precisely because it provided a perverse incentive to the distribution of profits in dividends rather than as re-investment. Not only all shareholders but particularly future pensioners will benefit from the economic growth that will be derived from the levels of investment that will now follow. As for our record on savings, the hon. Gentleman seems to overlook the success of ISAs, which the Conservatives derided when we brought them in. In the first year of their introduction, £28 billion was invested in more than 9 million accounts--one third more than went into PEPs and TESSAs the year before.

Mr. Jim Cousins (Newcastle upon Tyne, Central): May I pursue the point about ISAs? My right hon. Friend is absolutely right to say that they are now being opened by people in parts of the country and from parts of society who never had a savings habit before, and that they are encouraging and incentivising that habit. May I urge that the £7,000 limit on ISAs, which was extended from one year to two, be extended for a third year and made a permanent feature of the ISA system, so as to encourage that growth in ordinary people's savings throughout their lives?

Mr. Smith: My hon. Friend is quite right. Many people in our country were excluded from prosperity and from the chance to save under the previous Government but they now have the opportunity to benefit because we have a million more people in jobs, because of the help through the working families tax credit and because of the way in

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which ISAs respond to their needs. We are helping them further by tackling financial exclusion, for example by encouraging credit unions. As to my hon. Friend's proposal for the extension of the £7,000 limit, all advice for the Budget is gratefully received and I am sure that my right hon. Friend the Chancellor will give it due weight.

Mr. David Heathcoat-Amory (Wells): Why does the right hon. Gentleman have such difficulty in recognising his own figures? Is he aware that the Treasury's own published documents record a collapse in the proportion of savings as a percentage of national income, from 11 per cent. when the general election took place to 7 per cent., then to 5¾ per cent. and now to less than 4 per cent.? In the real economy, rather than the economy inhabited by Treasury Ministers, that is extremely serious and has very damaging implications for the long term. It is attributable to the £5 billion a year raid that the Government are carrying out on pension funds, which they started in 1997 and which is still under way. Will the right hon. Gentleman now admit his own figures, agree that there has been a collapse in private savings and tell us what he is going to do about it?

Mr. Smith: The right hon. Gentleman would do well to recall that the savings ratio fell to a lower proportion under the previous Conservative Government. He would also do well to understand, as I am sure that he does, that the savings ratio necessarily reflects spending patterns which themselves reflect the low unemployment, strong earnings growth, low interest rates, low inflation and strong growth in wealth that we are seeing in the country right now. Talking of figures and them adding up, the question that he and his right hon. and hon. Friends have to answer is from where the £16 billion of spending cuts will come. They will not help savings.

Mr. Roger Casale (Wimbledon): Does my hon. Friend agree that one of the best encouragements that the Government have given to savers has been to create a strong and stable economy and to put in place measures to safeguard economic growth in the medium to longer term? Of course, extra incentives may be necessary for individuals and families to save even more, and the Government are putting those incentives in place, such as employee share ownership plans, ISAs and stakeholder pension schemes. But a return to boom-and-bust economics, which would certainly accompany the return to office of the Conservative party, would destroy the secure savings environment on which the take-up of such incentives depends.

Mr. Smith: My hon. Friend is right. Nothing would damage the prospects of prosperity and future savings more than a return to the chronic short-termism and boom and bust of the previous Conservative Administration. Conservatives would do well to remember that under our spending plans, as set out this week, for every extra pound spent, only 17p goes on social security and debt interest. Throughout the Conservatives period in office, 43p went on social security and debt interest. There could be no clearer sign of how we are ensuring stability and steady growth. The extra money that we are able to spend goes to front-line services, and the Opposition still cannot say where they would find their £16 billion in cuts.

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Single Currency

5. Mrs. Ann Winterton (Congleton): What his policy is on promoting potential membership of the single currency in advance of an assessment of the five economic tests. [130132]

9. Mr. Nick St. Aubyn (Guildford): What recent discussions he has had with the Secretary of State for Foreign and Commonwealth Affairs about his policy on the single currency. [130136]

The Chancellor of the Exchequer (Mr. Gordon Brown): I meet Cabinet colleagues to discuss a range of issues. The Government's policy towards the single currency has not changed and will not change. We recommend joining a single currency only if it is in our national economic interest to do so, and if the economic case for the UK joining is clear and unambiguous. The Treasury will make another assessment of the five economic tests early in the next Parliament.

Mrs. Winterton: Does the right hon. Gentleman agree that before promoting potential membership of the single currency, full consideration should be given to the constitutional and political implications of joining? Does he further agree that a Government who give away control of their currency lose control of their economy and cannot therefore govern the country?

Mr. Brown: I take it that the hon. Lady never wants to join the single currency, and that that is her position. It is unfortunately not the position of the Conservative party, which on principle would rule out the single currency for one Parliament, but would not do so for ever. Our position on the constitutional issue was set out in full in my 1997 statement. We discussed and examined the issue, which is a factor in the decision. We do not believe that the constitutional issue is an insuperable barrier to joining the single currency if the economic conditions are met and if there is a referendum of the British people. If the hon. Lady is saying that she would never join the single currency, she will have to persuade the Leader of the Opposition.

Mr. St. Aubyn: The Chancellor has just told the House that the Government's position on the euro "has not changed and will not change." Why was it that when the Foreign Secretary came to the House a month ago to make a speech on the Government's position on the euro, he was forced to change it only minutes before he delivered it on the personal insistence of the Chancellor? Does not that show that the question of a referendum will not be decided in the national interest by the Government? Instead, it will be put forward on the basis of personal rivalries and petty jealousies which divide the Government from top to bottom.

Mr. Brown: If we are to talk about consistency, let us consider the hon. Gentleman's general election manifesto. He now poses as someone who is completely against the single currency. He even doubts whether a referendum would be fair. What did he say in his manifesto? This was his proposal:


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Mr. Alan W. Williams (East Carmarthen and Dinefwr): May I congratulate my right hon. Friend on his excellent management of the British economy? On the single currency, does he agree that interest rates and the exchange rate are vital considerations? On interest rates, there has been considerable convergence, but there is some way to go. On the exchange rate, the euro has strengthened 8 per cent. against the pound in recent months, but it remains substantially undervalued. Does he agree that the exchange rate, in particular, is a vital factor that we must take into account when we take our decision on the single currency?

Mr. Brown: I am grateful to my hon. Friend. I know of his particular interest in industry in Wales and I understand the difficulties that exporters, especially those in the manufacturing sector, face. I also understand the particular difficulties of the steel industry in Wales and elsewhere. He will agree with me that what manufacturers want least of all is a return to the stop-go policies of the past. After all, those policies killed 1 million manufacturing jobs at the beginning of the 1990s and made for record numbers of repossessions. In the years that the shadow Chancellor was at the Treasury, we had 15 per cent. interest rates, a £50 billion borrowing requirement and, in 1992, 22 tax rises. He is now going to have £16 billion of public spending cuts in 2000 if he gets his way.

Mr. David Taylor (North-West Leicestershire): Given that, under the gold standard, Bretton Woods and the exchange rate mechanism, we always had the right to come out if circumstances changed--as they did and as we did--does my right hon. Friend agree with the previous Chancellor who said that any future decision to abolish the national currency would for all practical purposes be irreversible and that, if things went wrong, we would just have to lump it? How strong a risk does my right hon. Friend believe there is of that happening?

Mr. Brown: It is the importance that we attach to this issue that has led us to say two things. The first is that the decision must be made in the national economic interest, and that is why five economic tests are to be applied. We will consider the matter early in the next Parliament. Secondly, we have decided that there would be a referendum if a recommendation was made and, therefore, any recommendation would come before the Cabinet, the House of Commons and would then go before the country. That is the right way of approaching this issue. It is quite ridiculous to say that one is against the principle of a single currency for one Parliament only and to refuse to be able to put the arguments for ever, but that is what the Conservative party wants to do.

Mr. Matthew Taylor (Truro and St. Austell): While the House ponders why the Chancellor feels he should answer questions on the euro this Question Time when he did feel not able to answer them last time, and given that the Prime Minister has reportedly let Ministers off the leash to make the case for the euro, perhaps the Chancellor will tell us why he believes that Britain should join the euro in the right economic circumstances?

Mr. Brown: The unfortunate thing about the position taken by the hon. Gentleman is that he would rush into

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joining the euro without making a proper assessment of the economic tests. I believe that it is in the national economic interest, when a serious decision such as this is being taken, to do it properly by examining all the economic issues. The economic tests affect employment, investment and every individual sector of the economy. They also affect the flexibility of the economy and the durability of convergence. I would have thought that, if the Liberal Democrats were concerned about the future of the economy, they would want us to take exactly that approach. That is what we shall do.

Dr. Nick Palmer (Broxtowe): Does my right hon. Friend accept that there are three intellectually respectable positions on the euro? The first is to commit to joining immediately as the Liberal Democrats favour; the second is to oppose it on principle, as a section of the Conservative party favours; and the third is to enter it if it is in Britain's best interests and if the currency is a success, as is our policy. Has he given any consideration to including as an option the official Opposition's policy of ruling the euro out for whatever the length of the next Parliament will be--be that one, two or five years--and does he see any intellectual coherence in that?

Mr. Brown: The right course of action is to consider the matter in terms of the economic interests of the country and to make a proper assessment early in the next Parliament with a view that, if an assessment recommended yes, the Cabinet, the Government and then Parliament and the people would make the final decision. What is not respectable is the position of Conservative Members because the shadow Chancellor is on record as saying that a single currency


However, a few months later, on "Breakfast with Frost", he said:


Mr. Tony Baldry (Banbury): Does the Chancellor accept that there is not a single Member of this House who believes that the economic tests are anything other than entirely politically self-serving? There is not a single Member of the House who believes that a decision on a referendum will be made on anything other than political judgments. Would it not be far more politically honest and far more in the public interest if the Labour party were to say that if it won the next election, there would be a referendum on the single currency in the lifetime of the next Parliament? The policy that the Government are currently pursuing is bringing not only the single currency but the Labour party into discredit.

Mr. Brown: It is precisely the ill-thought-out views of hon. Gentleman that led the previous Government to join the exchange rate mechanism in the wrong conditions--[Interruption.] Conservative Members now want to blame us for the ERM. My goodness, we are learning a lot today. All the decisions of the previous Government are now the Labour Government's fault. The shadow Chancellor wants us to forget that he was at the Treasury between 1992 and 1994. The failure to think things through in the necessary detail and to apply the economic tests that we are applying led the Conservatives into the difficulties that

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caused the exit from the ERM when the shadow Chancellor was at the Treasury. We shall not repeat that; only the shadow Chancellor would.

Mr. Michael Portillo (Kensington and Chelsea): My hon. Friend the Member for Banbury (Mr. Baldry) was absolutely right to ask that question. Regarding the five economic tests, does the Chancellor accept that judging whether the British economy is sufficiently flexible to adapt to change is wholly a matter of opinion? Whether or not joining the euro would help long-term investment is merely a matter of debate. The impact of joining on financial services in this country is a matter on which views are hotly divided. Whether or not joining would be good for jobs is a matter of dispute.

Does the Chancellor believe that those tests, which are merely matters of opinion, can be taken seriously by anybody? Are they not just a means of allowing him to stall now, so that if the Labour party wins the election, he can take an arbitrary, ideological decision to scrap the pound.

Mr. Brown: I thought that the shadow Chancellor would answer the point that I put to him. If it is in the economic interest to join, we would consider doing so, would apply the five tests and put the matter to a referendum. The decision will therefore be made in the country's economic interests. The five tests refer to employment--which I would have thought the right hon. Gentleman was concerned about--investment, all the sectors of the economy, the flexibility of our economy and the durability of convergence. That is the right way in which to make the decision, and then put it to the people, if that is our recommendation.

The position of the shadow Chancellor and his hon. Friends is not respectable. He has said:


of a single currency. However, a year or two before that, the shadow Chancellor told the Welsh Conservatives:


He said that that was best for Britain. Sooner or later, the shadow Chancellor will have to answer questions, not only about £16 billion of spending cuts, but about the euro. Is he for or against the euro in principle? We have made our decision and are for the euro in principle, where the benefits in trade, investment and jobs are shown, and we will put it to the economic test. The question for the Conservatives, who have not got past first base on this issue, is do they oppose the euro in principle, or do they support it? Yes or no?

Mr. Portillo: It is really disgraceful that the Chancellor of the Exchequer will not answer questions on the economic tests. I would have thought that he had more intellectual self-respect and I really do not know why he is so unrelaxed when he talks about the euro.

I could say:


Those are the words of the Northern Ireland Secretary. The Chancellor seems determined today to deny the British people a proper debate on this most important

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issue. I do not often agree with the Northern Ireland Secretary, but was he not absolutely right to describe the Chancellor as neuralgic on this subject?

Mr. Brown: One normally starts a debate by saying where one stands on principle. Do the Conservatives support the single currency, or oppose it? Do they believe that the constitutional issues are an insuperable objection, or not? Do they believe that the economic tests matter, and that if the economic conditions were met they would join? Would they put the issue to the British people in a referendum? Those are four questions that not one Member of the Conservative Front Bench can now answer, because while they do not rule out the single currency in principle, they rule it out for the next Parliament and want to imply that they have ruled it out in principle.

We will make the five economic assessments, and we will put the matter to the British people if our decision is that yes, we could join. We have already stated where we stand on the principle, on the constitutional issue and on the question of whether the economic conditions are met. I ask the shadow Chancellor again: does he support the euro single currency or does he oppose it--yes or no?


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