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Madam Deputy Speaker (Sylvia Heal): Order. I remind all Members that Mr. Speaker has imposed a 15-minute limit on Back-Bench speeches.
2.44 pm
Mr. John McFall (Dumbarton): It is a pleasure to speak in today's debate, and I begin by thanking the Chancellor for the Treasury's response to the Select Committee report on the euro. In particular, I want to thank him, on behalf of my colleagues, for saying that the report is an important contribution to the debate. I remind the House that this report was unanimous—a fact that demonstrates that individuals throughout the House can come together and examine a complex and sensitive issue in a serious way. I want to compliment my colleagues on their long-term contribution to this debate.
We did not undertake a running commentary on the Chancellor's tests, but we did identify key questions. For example, are they the correct tests and does the technical and preliminary work cover the relevant areas? Also, how did other countries prepare—or how are they preparing—for entry, and what were their changeover plans? I hope that the report can be a template for the ensuing debate, because we need a long and sustained discussion on this issue.
I commend the Chancellor and the Treasury for the rigorous economic analysis that they undertook. A look back at the 20th century reveals the debacle of sterling, which began in 1925 with the gold standard and continued in the 1940s. Devaluation occurred in 1967, and the debacle culminated in our exit from the exchange rate mechanism. The shadow Chancellor's imprecision is admirable, as he was very much involved in the ERM decision. We can imagine him and other members of the then Cabinet in Horseguards Parade, listening to the radio to discover the latest value of sterling, and to see where their policy would lead them. I do not call that decision making—I call it an utter and total shambles. If he wants to show the necessary degree of humility today, I shall be delighted to give way to him.
Mr. Howard: The hon. Gentleman must know that I have said on countless occasions that the decision in question was a terrible mistake, and that I fully accept my share of responsibility for it, because I was a member of the Cabinet at the time, but unlike Labour
Members—who were fully supportive of that decision before, when and after it was taken—I have learned the error of my ways. I am determined that the people of this country should not again have to go through the hardships that they went through after that decision was taken.
Mr. McFall: For the shadow Chancellor, that is an example of consistent humility, and I shall be quite happy if he signs up to it, but in practice, one week he says that he is humble, and the next he becomes arrogant on this issue. The point is that it is those in government who take the decisions; it is not the Opposition who take them. We have to make the economic tests rigorous, and I should like him and the rest of the official Opposition to sign up to that principle. Economic tests are extremely important, and the Committee was unanimous in recognising that fact.
Although the five tests are extremely important, there is a debate as to whether they are clear and unambiguous. At the end of the day, some form of judgment on them is essential.
Mr. Redwood: It is customary when candidates sit examinations that they can never pass that somebody says to them at some point, "I wouldn't carry on wasting your time." At what point should we say to the Chancellor that there is no point in trying to pass these tests, because we are not going to?
Mr. McFall: That position derives from a stubborn and intellectually ignorant base. The issue that we must engage with is Europe, but where are the Tory party coming from in this regard? On GMTV on 1 May 1999, the former shadow Chancellor, the right hon. Member for Kensington and Chelsea (Mr. Portillo)—he is in his place—said, with determination and sureness:
- "We've always said that we don't know whether the principle of a single currency is right."
What we heard from the shadow Chancellor a few moments ago was an elucidation of all the negative aspects: nothing positive and no engagement in the debate on Britain's place in Europe. That reflects the negative position of Conservative Members, and they will never make electoral headway until they realise that they have to be honest and open with the electorate and engage in a constructive debate.
From a personal point of view, I would like to comment on the fact that only one of the five economic tests has been passed. That is similar to the position in 1997. In the coming weeks and months, I would like the Chancellor to elaborate on the tests, because I believe that significant progress has been made in several aspects of them. For example, on convergence, the Chancellor himself said in a report this morning that "significant progress" had been made, and I well remember Professor Michael Moore of Queen's university Belfast telling the Select Committee that there would be no convergence
- "until Britain joins the monetary union."
We are currently one of the most flexible economies in Europe. Yes, more could be done, and I applaud the establishment of the review on housing and labour market flexibility, but the Chancellor should report on that matter in a reasonable time. Professor David Miles, whom he appointed to examine the issues, gave evidence to the Committee, and I questioned him on how long it would take to move over to fixed interest rates. He said that it could take several years. The question is whether we are satisfied that sufficient progress has been made, or whether we wait for full completion in respect of the housing market, which could be detrimental to our medium and long-term interests in Europe.
On investment, are we not already losing out in existing circumstances? Several witnesses spoke about that, including the president of Alstom in the UK and the chief executive of Siemens. Niall Fitzgerald of Unilever made a submission in which he made it clear that the company was already suffering from the current position. The president of Alstom was equally clear in saying that, if hard facts were wanted, staying out of the euro would mean that, within two or three years, he would have to recommend transferring 50 per cent. of the UK's manufacturing jobs into the eurozone economy.
Mr. James Plaskitt (Warwick and Leamington): Has my hon. Friend seen the latest figures on foreign direct investment, which show a further fall in the value of FDI coming into the UK over the past 12 months?
Mr. McFall: I have seen those figures, which make the problem even more urgent. Constituencies such as mine, which has a whisky interest and greatly depends on exports to Europe, will very shortly start suffering if a decision is not taken.
The Chancellor told us that the City test was passed. Members of my Committee had regular and extensive discussions with individuals from the City, and it is fair to describe the City's position as agnostic—it will make money irrespective of what currency it is in. That is basically what City people told us, but we also have to consider the issue of regulation and euro regulation. The City of London is twice the size of its nearest competitor, Frankfurt, but regulation in Europe will increase over the years, which will be to the detriment of the City. As my hon. Friend the Member for Bexleyheath and Crayford (Mr. Beard) said, people in the City are aware that in the longer term it could be disadvantageous to the City, so they are turning their minds to a future in the euro.
The last test was jobs and growth. The figures will be important in the medium term, but there can be no doubt about the danger of longer-term detriment. The Chancellor made it clear in his opening speech that we depend on Europe for 3 million jobs, and we have £154 billion of imports and £140 billion of exports. That is hugely significant, so we have to be careful when so many jobs are at stake. The hon. Member for Moray (Angus Robertson) made an important point about that, which has not received the prominence that it should have. The status quo will no longer be an option.
The ground is moving under our feet, and if we do not recognise that, it will be detrimental to both our medium and our long-term interests. The status quo is no longer an option.Public understanding was the last issue that the Committee examined. We feel that the public have a right to know the parameters—
Mr. Andrew Love (Edmonton): I would like to bring my hon. Friend back to the five tests. He made historical analogies earlier when he spoke about the gold standard at $4.80 in 1925, making the point that we joined the exchange rate mechanism at far too high a rate. Is the exchange rate itself important enough to be one of the tests?
Mr. McFall: We heard evidence about that, and one of the witnesses described it as a sixth test. The report also makes considerable reference to the issue. Several witnesses were asked what the most suitable exchange rate would be, and the former Governor of the Bank of England came close to saying that the current level was almost correct. The exchange rate is an important matter. Professor Simon Wren-Lewis, the author of a study commissioned by the Treasury, mentioned 73p as an appropriate exchange rate, but in the Chancellor's response to our report, the Treasury did not—and I am not surprised—tie itself down on that. Several members of the Committee felt that we were roughly at the level at which we should contemplate going in, but that is a matter for the Government.
On public understanding, the polls suggest that people are about two to one against euro entry, but I do not view that as a case for packing up and moving away. Rather, it is a case for having a long and sustained debate. Intelligence from various studies suggests that the UK population is the least educated in respect of understanding of Europe. Being at the bottom of the league is disgraceful. It does not reflect on all of us in this place and it is crucial to aim for greater public understanding.
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