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Mr. Deputy Speaker: Order. I remind the House that the 15-minute limit on Back-Bench speeches applies from now.
5.5 pm
Mr. Robert Sheldon (Ashton-under-Lyne): The hon. Member for Truro and St. Austell (Mr. Taylor) made a lengthy attack on my right hon. Friend the Chancellor of the Exchequer--who was also attacked by the right hon. Member for Horsham (Mr. Maude). My right hon. Friend, however, has had only two and a half years in his position, and it has not been an easy time. Right from the outset, he said that his task was to produce stability and, to the surprise and admiration of those who follow such matters, he has achieved it. He should be congratulated on that.
I should like to speak briefly about the Monetary Policy Committee membership. I am pleased that the four outside, independent committee members will be given greater facilities to make their contribution. Each of the four will now have two economists--which is really quite generous, and will be very much welcomed, as they have an important contribution to make. I should have liked, however, for the committee to be rather more broadly based, and I wish that there were more visible signs of input from other parts of Britain, based on the needs of Britain outside the south-east. My right hon. Friend the Chancellor is right to have encouraged good and open argument, including from those who make the case for manufacturing industry in the regions. However, the argument--which is not between the regions, but between the south-east and the rest of Britain--should be rather more broadly based.
The Monetary Policy Committee has to deal with inflation, one important element of which is the large increase in house prices. Today, there was disturbing news about yet further increases in house prices. There is a very strong differential effect between house price rises in the south-east and those elsewhere. House price inflation is a fundamental part of inflation generally, although that has not always been sufficiently appreciated--particularly in the 1980s, when the Government thought that inflation was under control and ignored the importance of rising house prices.
I am worried that interest rates are being set to suit inflation in the south-east. Housing costs in the south-east are increasing greatly, unlike those in other parts of the country. The economy, however, is being run on the basis of events in the south-east.
The average house price in the south is more than £100,000. In my constituency--which is not as depressed as many of my colleagues' constituencies--one can buy an excellent house for less than half that price, and page after page in local newspapers describes such properties. My constituents are having to bear many of the consequences of high interest rates, for which the responsibility lies elsewhere.
My main concern--I am not sure that the Monetary Policy Committee has sufficiently dealt with it--is the forces of competition. When the committee decides to increase interest rates, is it fully taking into account changes in competition in the United Kingdom? The Government have done much to encourage competition--full marks to them for that--but does competition affect prices and inflation? I suspect that it does.
Car prices are very much affected by competition. The internet's effect on inflation is only small, but it will become much greater. Supermarkets such as Wal-Mart--the new company from America--also will have their effect on competition. What effect will they have on prices in the near future--a matter on which the Monetary Policy Committee has to comment?
Overseas competition, too, will have an effect on inflation. So many British producers are very conscious of competition from overseas. With a high exchange rate, that competition is even more serious. We need to widen and maintain the debate. The European central bank also needs to take those matters into account.
In his statement on 9 November, my right hon. Friend the Chancellor talked about hypothecation. That was very important, because it was the first comment that we have had on the subject. He said:
I have always agreed with the Treasury line on hypothecation. To earmark expenditure is to lose the ability to decide on priorities. In addition, the amount of tax collected may not accord with future expenditure plans. However, there is one case, which I have been pursuing for some years, for earmarking some money from taxation for particular purposes: when the demand is high and ever-increasing, the case for the services concerned is strongly urged and acceptable to all, and the cost is increasing indefinitely. The national health service meets all those requirements. As people's wants are satisfied, they turn ever more to their needs for medical care. The need and the cost are increasing, and will inevitably continue to do so.
In his foray into hypothecation, my right hon. Friend was right to select the national health service for what I hope will be the commencement of the process. The expenditure satisfies the conditions that would justify its
introduction. It is clear that the cost of the health service will rise ever faster than the rate of inflation or growth in the economy because the population is ageing. As other wants are met, health needs become an area of increasing expenditure. The time is coming when either we shall have to turn more to private medicine, which I do not favour, or we shall need a special national health service tax.
Anyone who has been in the Treasury has a visceral feeling about that idea. The road fund licence still casts its shadow 70 years later. One important weakness of hypothecation is that it does not take account of changes in priorities, as I said. However, the demand will continue indefinitely and we need to consider introducing a separate national health service tax. The issue needs to be sensibly explored. Proposals for such expenditure on the national health service in the Budget, if properly managed, could gain widespread support in a way that taxation changes generally do not.
I should also like to talk about our entry into the euro zone. There was always a case for not wishing the European Community to come into being or, more realistically, for opposing any extension of its activities. However, having opposed and having discovered that the Community was going to develop anyway without our presence, it was unwise to deny ourselves the opportunity to get involved actively and wholeheartedly. I am increasingly worried about the delay in accepting the euro. On 1 January 2002, just two years from now, the euro will be introduced in the European Community in notes and coins. That is important, because it is what will make the fundamental change. It is possible that Sweden, Denmark and, just conceivably from what I read in today's Financial Times, Greece may have entered by then. We could be the only members of the European Community outside the euro. Further economic and monetary changes will follow and we shall be excluded from them. As my right hon. Friend the Chancellor of the Exchequer said in his statement to the House on 27 October 1997:
The Chancellor set out five economic tests to be met before we joined the currency: whether there can be sustainable convergence between Britain and the economies of single currency countries; whether there is sufficient flexibility to cope with economic change; the effect on investment; the impact on our financial services generally; and whether it is good for employment. Some have queried the difficulty in deciding whether a clear and unambiguous case can be made for some of those. Can any precision be applied to the tests?
We have not had an assessment of how, in the two years following the statement, the tests are being met. Are we nearer to meeting them? If so, which ones? How have we moved in relation to the tests? Will there be a future assessment of how we are meeting the tests?
In today's edition of the Financial Times, the Foreign Secretary gave a stark warning about the potential dangers of staying outside the euro zone, and added that, by the end of next year, Britain could be the only EU member state without a firm date for joining the European single currency. Whatever happens following the introduction of notes and coin on 1 January 2002, it will mark a fundamental change in the perception of the currency and the closer economic integration of the Community.
We know that a number of manufacturers are querying the role of Britain as an offshore island and are considering that their future investment may be necessary in the euro zone. I am fearful of the cost to our country if we do not enter the euro zone before the common currency becomes an everyday currency. A decision to join after then could cause further problems for the Community and for ourselves, and the resolution of those problems could exact a considerable price economically and politically.
"the extra revenues from a 5 per cent. real terms rise in cigarette duties would go straight to additional investment in the national health service, worth £300 million a year--that is £300 million extra for hospitals and health care which could start next April."--[Official Report, 9 November 1999; Vol. 337, c. 891.]
That is the first statement in favour of hypothecation since the road fund duties in the 1920s.
"The decision on a single currency is probably the most important question that this country is likely to face in our generation."--[Official Report, 27 October 1997; Vol. 299, c. 583.]
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