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Mr. Brown: The euro has been a successful currency. It was introduced successfully when everybody said that it would not work. They said that it would not happen in 1999 and they said that it would not, technically, work, and it did. They then said that the euro was too weak against the dollar, but that position has reversed in the past few months. We now have a far stronger euro against a weaker dollar. The question for us, however, is not the value of the currency at a particular point in time, but whether we have the convergence and flexibility necessary to gain all the benefits of trade and investment that would come from being part of the single currency area. I agree with my right hon. Friend that the rigour of the assessment is a sign of whether we take the issues seriously. I am disappointed that the Conservative party seems to have no interest in taking seriously the rigorous assessment that we have made.
Mr. Alex Salmond (Banff and Buchan): Do not the 18 documents, 1,700 pages and tens of thousands of words amount to the longest "don't know" in political history? May I caution the Chancellor against the mental gymnastics he was performing in his statement? I have seen the House cheer him and I have seen it howl at him, but I have never seen it laugh at him, as it did for parts of his statement this afternoon.
As far as the lack of analysis of the benefits to the economy of Scotland, Wales, the English regions and Northern Ireland is concerned, with the clear pointers to the benefits of output and employment through joining the euro, is there not a fair case for saying that the
economies of those areas of the country are being sacrificed on the altar of problems in the south-east England property market?Finally, will the Chancellor tell us why he has suddenly made reducing pay for nurses, firefighters and policemen in Scotland, Wales and the English regions a condition of entering the euro? Does he really think that that will mobilise support for the single currency, or has he not bothered to tell the Prime Minister?
Mr. Brown: I thought that the Scottish National party spent all its time arguing for special Scottish rates and not for national and UK rates for wages. The idea that the hon. Gentleman now supports British rates and that there should be no separate Scottish rates seems to be a reverse for the Scottish National party from its previous position. The hon. Gentleman has spent most of his career arguing for a Scottish pound and for breaking away from the British pound, yet now he seems to be arguing that he wants the euro introduced and he has forgotten his policy for a Scottish pound. The Scottish National party has adopted a remarkable set of contradictory positions.
On labour market flexibility, there is a national framework of fairness that the hon. Gentleman and other Members should support. Not only is the minimum wage agreed at a United Kingdom level, irrespective of the costs of living in different parts of the United Kingdom, but the tax credit system means that people who move between jobs, especially those in low-paid jobs, have additional funds whether they are single, part of a couple, or part of a family. The hon. Gentleman should support that framework of fairness for the whole of the United Kingdom.
Mr. Stephen Byers (Tyneside, North): As someone who has discussed the issue with the Chancellor on several occasions over recent years, I applaud the positive tone that he struck this afternoon. Does he accept that although it is clearly right to delay a referendum until it is in the national economic interest to join a single currency, that does not prevent the Government from consistently setting out the benefits of joining the single currency in terms of more jobs, increased trade and higher investment? Given that that is the case, will the Government begin to go out and campaign, and convince the British people of the benefits of joining the single currency? Will they move away from the present position of prepare and decide to a more positive one of campaign and convince, and will the Chancellor, alongside the Prime Minister, lead that campaign?
Mr. Brown: When my right hon. Friend was Secretary of State for Trade and Industry, as well as when he was Chief Secretary to the Treasury, he was active in promoting the case both for Britain in Europe and for a single currency. He agrees with me that the economic conditions must be right—that has always been his position—and that the five tests must be observed. He would agree with me that the rigour that we have brought to the analysis of the five tests is not only important but necessary if we are to get the right decision.
I agree that it must be shown to the British people that there are benefits to joining in terms of trade, investment, the importance to the financial services and,
as a result, jobs. I also agree that, in the campaigns that he mentioned, we should tell the British people that the benefits are real and available to them, and that we have to solve the problems of structural convergence and flexibility to make the benefits possible. We will consider all those difficult issues over the course of the next year and report back to the House.
Mr. David Ruffley (Bury St. Edmunds): In the interests of clearing up uncertainty in the markets, will the Chancellor tell us in which month next year he will re-run his assessment of the five economic tests?
Mr. Brown: If the hon. Gentleman had followed my statement, he would know that we will report back and review the situation in the Budget. If the review shows that there is progress, we will decide whether to have a further Treasury assessment of the five tests. That will be contingent on the announcements that I make in the Budget next year.
Angela Eagle (Wallasey): In the evidence that the Treasury Select Committee took on the issue, we came across a significant worry, particularly among trade unions, that the stability and growth pact would put at risk the historic and very welcome investment that we are currently experiencing in our public sector. Will the Chancellor reassure them on that point?
Mr. Brown: The Government's position throughout has been that we would like to see a stability and growth pact that takes account of the three issues, and I believe that the previous Government took the same view. We have to take account of the level of debt. Countries with low levels of debt, such as ours, ought to be able to borrow more, particularly in difficult circumstances or in making public investment. Investment should be taken into account, and it should be realised that there is a distinction between investment for the future and current consumption. The economic cycle should be taken into account as well. In my view, other countries are gradually recognising that those issues are necessary for a successful stability and growth pact. There is considerable debate in the European Union, and I believe that, intellectually, we are winning that debate: the stability and growth pact must take into account those conditions. Of course, that is one of the issues on which I said I would report back to the House next year.
Mr. John Maples (Stratford-on-Avon): If we were in the euro and found ourselves with a manifestly inappropriate interest rate, as do, for example, Germany and Ireland at the moment—in one case, it is too high, preventing economic recovery, and, in the other it is too low, failing to control inflation—what action would be available to the Chancellor to offset that? If he says, "Adjustments to fiscal policy", will he explain exactly how they affect monetary conditions, except in the medium to long term?
Mr. Brown: On convergence, the aim is to be able to live comfortably with the euro area interest rate—that is what sustainable convergence is about, and it is what we have looked at and are looking at in the five tests, and we have reported to the House on that—but we do not believe at this stage that that is the position. We believe,
however, that reforms are important, first, in the flexibility of the labour market, so that there is sufficient flexibility to respond if business cycles start to diverge. We believe that, as a back-stop, the monetary policy regime that we introduced, which is based on the open letter system, should be introduced for fiscal policy, so that we have a modern form of fiscal policy that can back up the stability and growth pact in the monetary union. At the end of the day, four flexibilities are available to the Government: exchange rates, interest rates, fiscal policy and flexibility in wages and prices markets. We are looking to greater flexibility in wages and prices and to greater flexibility in fiscal policy.
David Hamilton (Midlothian): Does the Chancellor understand that, when he talks about breaking national pay bargaining, he is also talking about breaking national wages and conditions for the lowest-paid people in this country? I for one would oppose such a move. Does he understand that national pay bargaining is there for the weakest in our country and, indeed, that it is protected? The danger of moving down such a road would be that the minimum wage would become the maximum wage in many areas, especially in deprived areas?
Mr. Brown: I must correct my hon. Friend: he has been misled by Opposition Members. In my statement, I referred to the maintenance of the national bargaining framework, not to its abolition, but I said that, within the national bargaining framework, we now have to recognise, for example, conditions in London and the south-east, where, because of high inflation or high house prices, the cost of living for workers must be recognised in the wage bargaining formulae that are agreed. That has happened in many cases for professional workers, but not for low-paid workers, and it is very difficult for low-paid workers in some parts of London and the south-east to afford the housing that they need. I believe that recognising such problems is a progressive cause that he and other hon. Friends should support.
It is true to say that the minimum wage itself is not the only component of the national framework for fairness that I am talking about. The people who benefit most from our national framework for fairness are, for example, single parents who are on relatively low hourly rates, but whose incomes are boosted very considerably by the operation of the tax credit system. The working families tax credit, which went to 1.3 million people, was a framework for fairness that allowed single parents and others returning to work, part-time or full-time, virtually to double the amount of earnings that they would have had under the national minimum wage.
In April, thanks to the decisions of my right hon. Friend the Secretary of State for Work and Pensions, single people and couples are now also able to benefit from tax credits. So people who move between jobs or between regions can rely on there being in Britain—one of the few countries where this happens—a national framework for fairness, where the tax credits system ensures that the tax system will pay them money, rather than take money from them, if their wages are below a certain level.
I hope that my hon. Friend will agree that the national framework for pay bargaining is in place, that there is a need to accept that local and regional differences have to be recognised and that the national framework for fairness guarantees that, wherever people are—in the north-east, Yorkshire, Scotland, Wales or Northern Ireland—they are treated equally in the provision of tax credits, which is a fair way to tackle poverty in our country and to remunerate properly people who otherwise, under previous Governments, would have been pushed into poverty.
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