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6. Mr. Alan Simpson (Nottingham, South): What rate of conversion between the pound and the euro is compatible with the UK's long-term economic interests. [150140]

The Chancellor of the Exchequer (Mr. Gordon Brown): The best contribution that the Government can make to delivering a stable and competitive pound over the medium term is to adhere to stability-oriented policies based on delivering low inflation and sound public finances.

Mr. Simpson: I am grateful to my right hon. Friend for a non-committal statement on the exchange rate--it is exactly what prudence would have expected--but can he confirm that even the most gung-ho and enthusiastic of his current or former Cabinet colleagues has not urged him to join the single currency at either yesterday's or today's rates of exchange? If there is a case to be made

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for devaluing the pound, which is implicit in the representations that they make, will he use his powers of persuasion to urge them to recognise that macroeconomic consequences will follow in respect of precisely the issues that he has set out--inflation, interest rates and the implications for personal and company taxation?

Mr. Brown: It is precisely because there are major issues to be addressed in any decision about the euro that, in 1997, we said that although we supported the euro in principle, in practice five economic tests have to be met. We said that we would review the matter and make those assessments early in the next Parliament--indeed, within the first two years. That is precisely what we shall do. We support the euro in principle because of the benefits. We believe that there are constitutional issues, but if the economic benefits to Britain are clear and unambiguous there is a case for joining--but the decision would be based on the five economic tests. If we were to recommend yes, there would be a referendum.

Sir Peter Tapsell (Louth and Horncastle): Does the Chancellor agree that the highly relevant question asked by the hon. Member for Nottingham, South (Mr. Simpson) is unanswerable? Does the right hon. Gentleman accept that our national experience with the pre-war gold standard, the Bretton Woods dollar standard and the exchange rate mechanism has surely proved that any fixed rate exchange arrangement must, inevitably, become incompatible with our long-term economic interests? Will he use his great influence in such matters to ensure that this country does not re-enter any form of monetary straitjacket imposed on us from overseas?

Mr. Brown: It is precisely because of the major issues involved in dealing with the relationship between the euro and the pound that we have set the five tests. We shall assess those matters early in the next Parliament and report accordingly--but I take it that the hon. Gentleman is criticising the policy of the previous Government.

Mr. Ben Bradshaw (Exeter): Is not it the case, despite the recent exchange rate, that, to quote the International Monetary Fund report again, our economy has enjoyed

Is not it a counsel of despair to suggest that the best or, indeed, the only way to maintain competitiveness is through a weak sterling policy?

Mr. Brown: The IMF report does mention the euro and says that our proposals to make assessments based on economic tests are the right way forward. The report, as my hon. Friend said, commends the authorities

It continues:

and says that, looking ahead, directors expected that

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Mr. Richard Ottaway (Croydon, South): Following his embarrassing interview on the "Today" programme, when he refused to discuss his so-called tests, will the Chancellor at least give Parliament some straight answers? Does he agree that his five tests on the euro are nothing more than a sham, that they are completely subjective, and that they add up to four fudges and a fiddle? The best way to protect Britain's long-term economic interest is to keep the pound by voting Conservative at the next election.

Mr. Brown: The IMF report quoted by Conservative Members overnight suggests that the five economic tests are the best way forward. They are not arbitrary tests; they are tests concerning the issues that are relevant to the United Kingdom economy--[Interruption.] If the right hon. Member for Kensington and Chelsea (Mr. Portillo) and his friends now think that it is not relevant to assess first, investment; secondly, employment; thirdly, manufacturing industry and financial services; fourthly, flexibility; and fifthly, the degree of sustainable convergence, it is clear that their policy is built purely on dogma.

Public Service Investment

7. Dr. Nick Palmer (Broxtowe): If he will make an assessment of the implications of the comprehensive spending review for future investment in public services. [150141]

The Chief Secretary to the Treasury (Mr. Andrew Smith): The plans set out in last year's spending review will double public net capital investment over the next three years to £19 billion. The Government will reverse years of underinvestment in order to deliver modern schools and hospitals and an integrated transport network.

Dr. Palmer: In Broxtowe, there are two new schools, numerous refurbishments and two major hospital developments. Does my right hon. Friend agree with my constituents, who feel that such action makes more sense than the last Government's policy of squeezing public investment in order to pay for their other policy of high unemployment?

Mr. Smith: Yes, indeed. My hon. Friend gives excellent examples of the benefits of public investment in his constituency. I well recall discussing these and other matters with him at the consultation meeting with his constituents that he arranged for me last year. The good news he reports is proof that the Government are listening and delivering.

Mr. Edward Davey (Kingston and Surbiton): What contingency plans does the comprehensive spending review contain for increasing investment in London's public transport services if the public-private partnership is not concluded by the end of the financial year? Is the Minister aware that alternative public investment plans for

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the tube, first presented by the Liberal Democrats, are now supported by more than 80 per cent. of Londoners, by Bob Kiley, and--following their latest U-turn--even by half of those on the Conservative Front Bench? Will the right hon. Gentleman therefore also support a plan that is safer and more cost-effective than the PPP, draw back the curtain, and come down the yellow brick road?

Mr. Smith: The refurbishment and modernisation of the tube in London is of the utmost importance. That is why we have presented the public-private partnership as the best means of delivering cost-effectively the modernisation that is needed. The operation of trains will remain in the public sector, health and safety will remain independently in that sector, and discussions must take place--and are continuing--with Mr. Kiley and with Transport for London. It is in the interests of Londoners and the future of the modernisation of our tube that those talks succeed, and that through the public-private partnership we avoid the overruns on costs and time that characterised the Jubilee line extension.

Public Investment (Emergency Services)

8. Mr. Jim Fitzpatrick (Poplar and Canning Town): If he will make a statement on the implications of the pre-Budget report for investment in public services, with particular reference to emergency services. [150142]

The Financial Secretary to the Treasury (Mr. Stephen Timms): We have been reminded in the past 24 hours of the critical importance to all of us of the work of the emergency services. The whole House will want to express its admiration for their work at Selby.

The Government's plans for spending on public services were set out in last year's spending review, and updated in the pre-Budget report. Police spending is set to rise from £7.7 billion to £9.3 billion in 2003-04; the standard spending assessment for fire services is set to rise from £1.4 billion to £1.6 billion in that year.

Mr. Fitzpatrick: Given the extra resources and the new partnership arrangements being created across the emergency services, can my hon. Friend assure us that full consultation will take place with both trade unions and professional associations, as well as with local authority representatives and the managers of the various organisations and services?

Mr. Timms: What has happened is that national debt is down. In 1997, it was 42 per cent.; it is now 31 per cent. and decreasing. That plus lower interest rates means that £4 billion is available for extra spending. Unemployment is also down, which again makes extra spending available. Those key changes enable the emergency services to plan with confidence for the future, working--as my hon. Friend said--in partnership with local authorities, trade unions and others who are involved. What the services could not cope with is having to contribute to the spending cuts that would be necessary to deliver the policy of Conservative Members.

Mr. Nick St. Aubyn (Guildford): Is the Minister aware that in Surrey, the sum being given to our police force is being cut in real terms and, according to figures supplied to me by Surrey police, in absolute terms by as

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much as £6 per head? How can we have any confidence in the Government's commitment to fight crime when they are prepared to cut the funding of one of the best performing police services in the country?

Mr. Timms: I have said that our plans are to increase spending on the police service. The hon. Gentleman must explain why he supports cuts if he is really looking for more spending. In the next three years, an additional 9,000 recruits across the country will be funded centrally by the crime fighting fund. Police numbers will reach 128,000 by March 2002, and we are expecting further increases after that.

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