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Mr. Stephen Dorrell (Charnwood): The hon. Gentleman develops an interesting argument. As I understand it, he says that he would not contemplate joining the euro under the present exchange rate; that is proposition one. Proposition two is that the Government should be working much harder to create circumstances whereby Britain could join the euro. That means that the hon. Gentleman must have in his mind a target exchange rate, at which that would become a realistic policy. Will he tell the House what that target is?
Mr. Taylor: I shall be glad to, and if the right hon. Gentleman is interested, I can send him the document produced with the help of a commission of very senior economists that we assembled; it sets out what we believe the position is in relation to the Government's tests, how they can work towards them, and the other conditions that will have to be met to enter the euro.
Mr. Dorrell: Answer the question.
Mr. Taylor: I shall answer the question. The document also sets out the exchange rate itself. We sought advice from experts, and I believe that those in government should do the same. In the nature of things, the position two years down the track may be a little different, but the experts suggested to us a range of 1.25 to 1.45 euros to the pound. Like me, the right hon. Gentleman probably does not find it easy to translate what that means, but we are talking about a range between DM2.44 to DM2.83--which, incidentally, is broadly the same conclusion around which all the academic studies on the subject have argued. It also agrees with the conclusion of the IKEA study of comparative pricing carried out by Barclays and published in November.
IKEA prices give us a good way of testing comparative pricing, because IKEA sells exactly the same products in every country, and the study showed clearly that within the eurozone, people can buy the same goods for about 20 per cent. less. The range of prices between one euro-country and another was very narrow, which is exactly what one would expect would be the benefit of
being within a single currency. We believe that we could not join unless the exchange rate was broadly in the range that we have been advised, and that I have suggested.
Mr. Dorrell: The hon. Gentleman has developed the IKEA test, and there are many previous versions of that, such as the Mars bar test and the McDonald's test. We have all seen those purchasing power parity tests. However, in the run-up to the general election the Liberal Democrats will now have to campaign all over the country arguing the case for a 20 per cent. devaluation of sterling.
Mr. Taylor: I have set out a range for the right hon. Gentleman, and I shall not be tied to any specific figure. That range is what we were advised, and it also matches all the other advice. If the right hon. Gentleman represents farmers, or manufacturing companies, he should realise that much of the pain that they are suffering results from the current overvaluation of sterling.
The Conservatives cannot talk about all that, because they have to maintain the fiction that all is well outside the euro--and the Government cannot talk about those issues either, nor will they give any indication of where they believe we stand on their tests or how they seek to achieve results, because they are not prepared to take on the argument about the euro.
I was delighted to hear the right hon. Member for Huntingdon (Mr. Major) conduct an intelligent debate on the subject--and I believe that the right hon. Member for Charnwood (Mr. Dorrell) and I are also having a reasonable debate about it. However, we hear absolute rubbish from Conservatives who seek to pretend that they never wish to join the euro, and would save the pound, although their policy is merely to postpone a decision. The Government are frightened, which probably means that they might as well rule out entry for the next Parliament, because it is inconceivable that they could win the argument, hold a referendum and win it, unless they get on with arguing for it now.
The result of that false debate is the loss of a quarter of a million jobs, the loss of international market share since the euro was launched, and the loss of our share of international investment, which has been declining since the euro was launched. The euro economies are also growing faster than ours, and consumers throughout Europe are paying lower prices than we are. Rip-off Britain is the flip side of the Save the Pound campaign. People are paying an average of £580 a year more on their mortgages than they would if our interest rates were similar to those in the rest of Europe.
This debate urgently needs to be conducted. There are arguments for and against, but the rubbish that we hear, and the Government's avoidance of the debate, lead directly to the economic problems that we suffer--problems that the Chancellor dare not and will not mention.
Mr. Richard Livsey (Brecon and Radnorshire) rose--
Mr. John Bercow (Buckingham) rose--
Mr. Taylor: I shall give way to my hon. Friend first, and then to the hon. Member for Buckingham (Mr. Bercow).
Mr. Livsey: Will my hon. Friend also take into account the fact that many component manufacturers have gone
abroad? I lost 1,000 jobs in my constituency, and they went to Poland, where wages were one fifth of the level in south Wales. Because of overproduction of cars, the margins have been cut, and because of the euro situation firms are looking for cheaper production. I suggest that that is the cause of the problems in Vauxhall and many other companies, which are trying to overcome the problem by compensating in different ways.
Mr. Taylor: There is a series of issues, but let us remember that Poland, like many other countries, is a candidate for membership of the European Union. The problems will grow if Britain is not prepared to be a full player in the European Union, to influence the decisions and to take a leading role. Conservative policies would deliver none of that.
Mr. Bercow: Will the hon. Gentleman give way?
Mr. Taylor: Yes, I did say that I would give way to the hon. Gentleman.
Mr. Bercow: I thank the hon. Gentleman for giving way to me, because he has whetted my appetite to pursue another point. The governing council of the European central bank comprises three Germans, two Dutchmen, two Finns, two Frenchmen, two Italians, two Spaniards, a Belgian, an Irishman, a Luxembourger and a Portuguese, and article 108 of the treaty of Amsterdam specifically prohibits national parliaments from seeking to influence the decision-making bodies of the ECB or the national central banks in the performance of their tasks. Given that, can the hon. Gentleman enlighten the House as to how he feels able to reconcile the operation of the single currency with democratic accountability to the British people?
Mr. Taylor: One thing is sure about the European currency: there will be no accountability to the British people while we remain outside it, but it will have a huge influence on them while 60 per cent. of our manufactured exports go into the eurozone. We must simply remember how important it is to us. The hon. Gentleman has a respectable position: he would never join the euro and he never will. Unfortunately for him, those on his Front Bench believe that they might join, but not for four or five years.
Tax and spending were the main issues debated between the parties, and the debate allowed a series of mispropositions to be peddled through the House. Those mispropositions are peddled through the House so often that I suspect that most hon. Members believe them. It is time to give the lie to them.
The Government have followed a policy of bust and boom in public services. In the early years, they followed Conservative spending plans that meant cuts in health and education, and real-terms cuts in the share of national wealth that went to pensions and pensioners. That bust has now been followed by a boom designed to win the general election. Harold Macmillan once enunciated the
principle that if one stands on people's heads long enough, they will be pleased when one gets off. That is precisely the position that the Chancellor has followed on spending.
Mr. Beard: Will the hon. Gentleman give way?
Mr. Taylor: I will in a moment. The cuts are now described as the starting point for the Labour Government, as though it were not the Labour Government who put them through. They cut expenditure at first and now they are putting it up--and they expect people to be grateful. In the lifetime of this Parliament, less of the national cake has been spent on all the public services--education, health and pensioners--than was spent by the previous Conservative Government.
Incidentally, there is something that I should put right. So far as I can see, the Chancellor gave misleading figures to the House in his pre-Budget report. According to the Library, even if we take not only the basic state pension but the whole package for pensioners, the Government have still managed to spend less of GDP on pensioners in this Parliament than was spent on them in the previous Parliament.
The election tactic is to cut first and spend later, which is the opposite of what Labour used to do--but it is no better, because it is dishonest. Hospitals are in crisis, schools have lost teachers, class sizes have risen in secondary schools and pensioners have received a 75p increase--and now, in his role as chairman of Labour's general election campaign, the Chancellor comes along pretending to be Miss Bountiful.
The problem that that raises for those on the Conservative Front Bench is simple. We shall not include social security, so we shall ignore the fact that unemployment has gone down, which is a justification that Labour sometimes gives for the figures. Even on that basis, the total managed expenditure is now lower than it was under the Conservatives. Tax of course is higher, but that is because it has replaced a deficit.
Taking the facts together, it is clear that the Labour Government are spending less of the national cake than the Conservatives did when they were in power. In fact, they are spending even less than the Conservatives planned to spend. Rather inelegantly, the former Prime Minister tried to get himself out of a hole by saying that the previous Government's announcement before the general election that they would increase tax was only a stylistic point. If that is so, perhaps his style was as bad as some of his colleagues thought, because the announcement certainly helped them to lose the general election.
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