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Geraint Davies: Does my hon. Friend think that the success of the Monetary Policy Committee--in terms of its constitution, its being transparent and its proceedings being minuted, for example--offers any lessons for the European central bank? The ECB is a black box whose proceedings are not minuted and which is difficult for the markets to understand. The limit on 2 per cent. inflation--as opposed to 2.5 per cent. plus or minus 1 per cent.--means that, in some senses, it is not only misunderstood but, arguably, relatively deflationary.

Mr. O'Neill: It is fair to say that the MPC represents, in many respects, the brightest and best in the economic field in this country--or, at least, the brightest and best who choose to make themselves available. It is fair to say that, in the European Union, the need for everyone to have a seat at the table and to be represented means that the body may be representative but not necessarily effective. Given the other constraints that my hon. Friend the Member for Croydon, Central (Geraint Davies) has identified, there is a great deal left to be desired.

I noted the point made by my right hon. Friend the Chancellor when he expressed concern about the way in which the ECB operated. While that is not one of the five conditions, it is perhaps one of a subset of additional anxieties that he is known to express from time to time about the working of the eurozone. We shall need to look at this institution before we shall be able to join it.

Ministers must grasp the nettle and explain the advantages for business and employment of the currency that they support but do not, as yet, wish to join.

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The Government were probably right to avoid confusing the electorate before polling day, but we need far more positive signals now. We should be under no illusion--our view on the five conditions must also include an indication of the euro value at which we would be prepared to join.

If such a package could be announced, it would be at that point--and only at that point--that a Bill for a referendum could be introduced. Assuming that that were to happen within the two years that the Government have set themselves, we would perhaps be talking about June 2003--I suppose, after the local government, Scottish Parliament and Welsh Assembly elections. We could then consider the passage of the legislation, and a referendum could probably be held in September 2003, with entry into the system taking place 18 to 30 months later--perhaps in February 2005 or 2006. Entry could take place later, but that would have implications for a general election in 2005. On the other hand, the matter could be delayed even further.

Whatever happens, it is abundantly clear that the argument in favour of a common European currency has yet to be put to the British public with sufficient clarity and concision to convince them that sharing power over monetary matters with our European partners will help our export competitiveness and give greater influence over the operation of the currency while still allowing us a degree of independence to establish our own fiscal and social priorities in a way that will benefit people and encourage them to support the new currency.

Failure to address those challenges will deny the British public access to the truthful and responsible information on the issue and jeopardise the confidence of the same European partners with which we need to work so closely on so many other Community issues.

There is much in the Queen's Speech that I am happy to support. The enterprise for all initiative has built on much of the work of the Clinton Administration and of my colleagues on the Trade and Industry Committee, in which we argued the case for relaxing a number of fiscal measures, an improvement in respect of capital gains and creating the opportunity to introduce new capital to businesses by removing certain penalties, which did not encourage people to invest.

We must not only unlock the doors of many closed businesses, but help businesses in which families have been reluctant to give up control, even though successive generations of family members showed no interest whatever in the business. The old guard would say that giving up their controlling interest was not in their financial interest, but, with an imaginative approach to capital gains tax, that will begin to happen.

I would like to think that we could begin to establish an equity economy such as that which is not uncommon in certain parts of California. In return for services, expertise and assistance of a sort hitherto denied to many small businesses by the corralling character of capital gains tax, fledgling businesses would be able, with equanimity, to hand over part of the equity in the business to people who join it.

All that, plus a willingness to encourage competition and to root out the cartels and cronyism that often infect areas of our national business life, is to be welcomed. I wish every success to my right hon. Friends at the Treasury and my right hon. Friend the Secretary of State

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for Trade and Industry, who is in her place. Like me, she has been impatient with cartels. The previous debate in the House in which we both spoke was on motor car prices and it was clear that a sharp axe had to be taken to that Gordian knot. Although it has not quite severed the knot, we have begun to get to the bottom of the problem.

In a number of examples, in a more competitive environment and with a more fiscally friendly approach to the structure of business, we are achieving the breakthroughs that we need. I would only ask my right hon. Friends the Chancellor and the Secretary of State to reconsider the ways in which we could seek productivity increases. Productivity lies at the heart of our economic regeneration, but if we cannot get our people to produce more and better-quality goods, all the rest is just empty rhetoric.

I wish my right hon. Friends good luck in their endeavours and I welcome the Queen's Speech, but let us look to the future and try to achieve even more than we anticipate achieving. The Queen's Speech represents an excellent start that enjoys the confidence of the country. It certainly enjoys the confidence of the good people of Ochil and the business community there. Although I have not always regarded it as the strongest supporter and friend of the Labour party, that is the strong message that I got at the election, and I welcome the opportunity to say so today.

5.29 pm

Matthew Taylor (Truro and St. Austell): I apologise to the House, but for family reasons I shall not be present for the winding-up speeches.

This debate is important for two reasons. First, it started with a debate between two people openly contending for the leadership of their respective parties, and not doing so terribly well. Secondly, it considers the fundamental issues that are likely to dominate the Government's path in the next four years. It is about the delivery of public services, and the degree to which that is about putting money in or about reform and change in the method of delivery. That issue is already dividing Labour Members of Parliament and those in the Labour movement, and is likely to be the crux of the debate.

The fundamental issues are also reflected in the debate on membership of the euro. The shadow Chancellor said that his party should now set that issue to one side in its campaigning. I take him to mean that he believes that the Conservative party should no longer campaign for or against the euro. He said that two business groups had been set up, one for and one against membership, and that the matter should be left to them. That seems remarkably similar to the position of the Chancellor, who also believes that the debate on the euro should be left to business, so that he need not dirty his hands with the issue.

This Parliament is also likely to be dominated by the question of the degree to which the private sector should be brought increasingly into play in public services.

Mr. Portillo: I am accustomed to being misrepresented most of the time on most things, but it was perfectly clear from what I said that the British people will want to debate our membership of the euro and that they will want their political parties to be involved in that debate when

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the issue is ready for a referendum. The timing of that remains with the Government. As no referendum is in prospect, I made the remarks that I did.

Matthew Taylor: I think that the shadow Chancellor confirmed that he believes that his party should not campaign for or against the euro until a referendum is called. That seems remarkably similar to the position that the Government, and certainly the Chancellor of the Exchequer, have adopted.

It was interesting to see the first outing of the revised version of the shadow Chancellor's approach to campaigning--or perhaps I should say the shadow leader of the Conservative party's approach. It was rather like attacking the Chancellor of the Exchequer with a pillow. I am not convinced that trying to be nice will necessarily deliver victory for the Conservative party. It has not worked for us over several decades, but we are always willing to offer advice on such an approach.

I want to deal with the imbalance in the economy. It is odd that a debate on the economy has involved so little discussion about where we stand. The Chancellor seems to believe that there are no problems facing us, and the shadow Chancellor scarcely touched on the issue, except to outline a policy to do the same as the Labour party but fractionally more efficiently with fractionally less waste. The truth is that there is a serious imbalance in the economy.

Internationally, American manufacturing industry is slipping into recession, and both the United States and Europe face real difficulties. However, our greatest concern should be about the British economy.

On the face of it, many things are going well. Growth in consumption in the year to March 2001 was 2.6 per cent. Consumers in the United Kingdom are still spending: private sector consumption is higher than that, at 3.2 per cent. Housing growth is about 7 per cent. on the year, and inflation remains very low. However, we see a different picture in farming and manufacturing. It is a picture of an economy in real difficulties. History has always told us that if we have real difficulties in the manufacturing sector and yet sustained, substantial growth in consumption, we shall run into all sorts of economic difficulties.

Industrial production and manufacturing output both fell in the first quarter, while services continued to grow almost as strongly as those fell. As a result, imports grew twice as much as exports. The Bank of England's agents report continued weakening of manufacturing in sectors including information and technology, which has provided something of an engine for the support of manufacturing exports in recent years. Productivity growth continues to be weak by international standards.

The economy is seriously unbalanced, which is reflected in services price inflation of 3.8 per cent. in April, compared to a slight fall in manufacturing prices.

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