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It could not be clearer than that. Mr. Major continued:
My intention in agreeing to the Protocol on Social Policy at Maastricht was to ensure that social legislation which placed unnecessary burdens on businesses and damaged competitiveness could not be imposed on the United Kingdom. The other Heads of State and Government also agreed that arrangement, without which there would have been no agreement at Maastricht"--
"no agreement at all at Maastricht".
"However, in its judgement today, the European Court of Justice has ruled that the scope of Article 118a is much broader than the United Kingdom envisaged when the article was originally agreed, as part of the Single European Act. This appears to mean that legislation which the United Kingdom had expected would be dealt with under the Protocol can in fact be adopted under Article 118a.
That is contrary to the clear and express wishes of the United Kingdom Government, and goes directly counter to the spirit of what we agreed at Maastricht. It is unacceptable and must be remedied.
The United Kingdom will therefore table amendments in the Intergovernmental Conference to restore the position to that which the United Kingdom Government intended following the Maastricht agreement. Those amendments will be aimed at both ensuring that Article 118a cannot in future be used in ways contrary to the United Kingdom's expectation, and dealing with the specific problem of the Working Time Directive.
I attach the utmost importance to these amendments and I shall insist that they form part of the outcome of the Intergovernmental Conference. I do not see how new agreements can be reached if earlier agreements are being undermined.
Meanwhile, I urge the Commission to refrain from making proposals under Article 118a which properly belong under the other Member States' Agreement on Social Policy.
12 Mar 1998 : Column 344
- I am sending copies of this letter to Heads of State or Government of European Union Member States.
- Yours sincerely,
- John Major".
Well, as your Lordships will be aware, the previous government failed to make any headway towards ensuring what they regarded as an honest interpretation of the treaty, and the saga was laid to rest when they lost the general election in May last year. Labour promptly signed the social chapter as part of its charm offensive in Brussels, and we have yet to see how much good or bad it will do us.
Be that as it may, this vignette is very helpful to an understanding as to whether we really do have an opt-out from EMU, especially when we come to consider the other five articles which remain in the treaty, to which I referred earlier. Again, to spare your Lordships as much pain from Euro-speak as possible, I shall extract the more relevant parts, but one really should read all of the articles concerned to appreciate their full meaning.
So, first, we have the old Article C, now Article 3, and I quote,
- "The Union shall in particular ensure the consistency of its external activities as a whole in the context of its external relations, security, economic and development policies".
Well, one might think that there is perhaps not too much to worry about there, just a spot of forced economic collaboration in the EU's external activities, whatever the Luxembourg Court may eventually decide those to be.
But the plot thickens. We come to the big one, which is Article 2. I quote,
- "The Community shall have as its task, by establishing a common market and an economic and monetary union ... to promote throughout the Community a harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States".
My three remaining articles clarify and add weight to Article 2. First, there is Article 4, which includes the following words:
- "For the purposes set out in Article 2, the activities of the Member States and the Community shall include ... the adoption of an economic policy which is based on the close co-ordination of Member States economic policies, on the internal market and on the definition of common objectives".
Then there is Article 98 which decrees, and I quote:
- "Member States shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Community, as defined in Article 2".
Lastly, there is Article 99, which is similarly clear. It goes as follows:
- "Member States shall regard their economic policies as a matter of common concern and shall co-ordinate them within the Council, in accordance with the provisions of Article 98".
Now, it seems to me that the main reason for the Government to avail themselves of what they regard as their predecessor's opt-out from EMU is because they too do not yet wish to join EMU, and therefore, for instance, to pool our interest rate with that of EMU's
participants. In other words, the reason for staying out of EMU is so that we can continue to run our economy ourselves, and the presumption must be that we hope to be able to do so more successfully than if we joined EMU. But what if we do just that? What if our economy remains more successful than those in the EMU zone? What if our unemployment stays lower than theirs? What if our unemployment goes on down and theirs goes on up? What if we wish to pursue different policies on taxation and social matters (pace the Social Chapter)? What if sterling continues to perform alongside the US dollar and the yen but the euro weakens, perhaps to the point of collapse? What, in short, if staying out turns out to be a thoroughly good deal for us and EMU turns out to be most uncomfortable for its participants but manages to survive because of the political will behind it?Articles 226 to 229 of the treaty (with the wording of which your Lordships will be pleased to hear I shall not weary the Committee) allow us to be taken for unlimited fines to the Luxembourg Court if either the Commission or one other member state considers that we have failed to fulfil an obligation under the treaty.
I would have thought that the clauses that I have just identified place the clearest possible obligation on us to run our economy on strictly communautaire lines at least. So, it does not take a great leap of imagination, if we prosper by staying out, to see us being taken to the Luxembourg Court for unlimited fines for such anti-communautaire crimes as, for instance, "exporting unemployment", "unfair taxation" or--perhaps a better one--"competitive devaluation". Nor does it take much imagination, especially in view of the saga of our opt-out from the social chapter, to foresee how the Luxembourg Court will behave.
Our economy may already have been more constrained than most people realise. To clarify this doubt, could I put one question to the Minister about the stability pact into which the previous government entered on our behalf? Although I appreciate that the Chancellor of the Exchequer at the time, my right honourable friend Mr. Kenneth Clarke, may have wanted to join the pact in any case given his well known affection for the whole European adventure including EMU, can I ask the Minister whether the UK could have stayed out of that pact if it had wanted to do so, or would the clauses that I have just mentioned and perhaps others, and the fact that we are committed to stages 1 and 2 of EMU, have been enough to force us to join that pact anyway? I would be most grateful if the Minister could enlighten us on this point when he comes to reply.
I also hope, in a rather forlorn sort of way, that the Government will accept this amendment for the reasons given by the noble Lord, Lord Shore, and others who support it, and also for the reasons I have given above, and no doubt many other good reasons about which we shall be hearing from other noble Lords. If the Government were able to do so, the signatories to the Amsterdam Treaty would be forced back to the negotiating table and Europe might have one last chance of avoiding the impending catastrophe which is EMU.
If this does not happen--I speak as a good European with friends and business associates in every European country--I fear that the future is bleak indeed.6 p.m.
Lord Peston: I assure my noble friend, and indeed other noble Lords, that I do not regard him as barking mad. I do not think that the Committee wishes the subject of asperity of speech to be raised a second time this week, but in a slightly choleric mood perhaps I may return to Amendment No. 1. I am sure that the noble Lord in moving that amendment--I am sorry that he is not now in his seat--did so with the best of intentions, but the Committee appears to have interpreted what was said then as opening the gates under the rubric of this Bill to discuss any subject it likes as long as the word "Europe" appears in it. To take an obvious example, if I wished to table an amendment that the World Cup in 2006 rightly belongs to our country rather than our European partners in Germany on the basis of the way that the Committee is currently proceeding I believe that that would be an acceptable amendment. Many noble Lords would rather be debating that than the present rather peculiar amendment.
Cholerically, two matters trouble me. First, I believe that we should debate the Bill before us. We have the highest ratio of amendments to size of Bill that I have seen in all my years in this Chamber. The noble Lord, Lord Moynihan, promised us many more amendments. That is bad enough. Secondly, we have two amendments grouped, neither of which has been spoken to by the people in whose names those amendments appear. Not a word has been said about Amendment No. 27. I do not intend to speak to it either, although it is not uninteresting. Even in relation to Amendment No. 1, the only noble Lord who spoke to Amendment No. 2 was the noble Lord, Lord Taverne, who tried to interpret the amendment. In introducing the amendment, my noble friend did not offer any explanation of it. No one else has offered any explanation from that moment to this. I hope that this does not set a precedent for how we shall proceed with this Bill. I fervently hope that my noble friends on the Front Bench have no intention of extending the number of days to discuss this little Bill beyond those to which we are already committed. Those are my acerbic remarks and now sweetness and light will follow.
My general position has been that, starting from scratch, the economics of EMU have always been well balanced. I have great respect for those who are doubtful, even though I believe that on balance the case is better made for entry, but I have never been apocalyptic on this matter. However, starting from scratch is not a decision that confronts this country at the moment. As the noble Lord, Lord Howell of Guildford, has pointed out, the question at the present time is what we should do given that it will go ahead. If it were my choice--it is not--I would go in at this stage. I can well understand why my right honourable friend the Prime Minister feels that that is not possible, but I am sorry that we have reached such a position. As someone who is proud of the greatness of our country, to wait and see does not inspire me with the notion that
we are terribly courageous. I wish we were. But there is no point in arguing the point, because it will not happen. What happens in due course depends on the practicalities. However, I am concerned that because of that the people of our country are very doubtful and bewildered. Until our leaders to whom the public listen--I do not include myself among them--speak out in favour of it, the people of this country will remain bewildered and doubtful. I do not believe that is good, certainly not as we enter the next millennium.Having said that, I should like to deal with one or two technical matters. Noble Lords have referred to optimum currency areas. This always fills me with despair. It is the standard comment. Elementary economics is turned into serious policy-making in ways which suggest that those who do it have not quite grasped what the subject is all about. I take an obvious example. Almost all the evidence of which I am aware shows that the United States of America is not an optimum currency area. When I taught in that country, one of the favourite exam questions to be set was whether it would be advantageous for West Virginia, which at that time had serious economic difficulties, to have its own currency so that it could devalue. One was easily able to demonstrate that the incredibly successful United States--perhaps the most successful economy in the history of the world--was not an optimum currency area. The moment one understands that, one realises how preposterous are the economists as against people who live in the real world. I am not even convinced that the United Kingdom is an optimum currency area, or has been for a long period of time. I utter a word of warning in relation to those who refer to an optimum currency area against EMU.
I was very puzzled by one matter referred to by the noble Lord, Lord Howell of Guildford. He thought that our interest rates were higher than those of the Germans as part of the present cyclical position. But he well knows that our interest rates have been higher than those of the Germans for 17 of the past 18 years. It is impossible that our interest rates should be higher than those of the Germans because of the present cyclical position. Our interest rates are higher than the Germans' because of the failure of our monetary policy, acting alone for the past couple of decades, as our central bank is a good deal less credible than the Bundesbank, not least with regard to inflation, but also with regard to other matters.
Perhaps I might put to the Committee the point which I have put before paradoxically: my judgment is that the one country that would benefit from EMU is our own. The real puzzle is why the Germans think that they would benefit, but that is their problem, it is not mine. The one country in terms of the history of policy that should be grasping the chance of going into EMU is ours.
On convergence, much of the earlier debate was about financial convergence, about which my noble friend Lord Grenfell spoke. My view is that financial convergence is sensible. The 3 per cent. criterion in terms of average budgets over the cycle makes good sense, and I speak as a Keynesian economist. It is not saying a zero budget; it is referring to the cycle. I should
have thought that that was not a bad policy, broadly speaking. I am not generally so certain about the 60 per cent., but that is another matter.Members of the Committee have referred to real convergence. Real convergence is an entirely different matter. I have to say two things about that. First, if real convergence is what is required, it is just not possible. There is no real convergence between the individual states of the USA. I doubt whether there is any real convergence between the individual parts of the German Federal Republic. Real convergence is not only impossible; for anyone who has any knowledge of the market economy, it is not even desirable. The whole point of a market economy is that it is dynamic and does not become stultified into something one would call real convergence. I hope that those Members of the Committee, whom I respect, who are doubtful about EMU do not go down that path, because I do not believe it makes any economic sense whatsoever.
We should not study the European Union and its economic policies as if somehow, as a result of this, they will be set in stone. We are doing something that I hope will last for a long time. We will learn from experience of what is happening in Europe. I do not doubt--I am sure that the noble Lord, Lord Pearson of Rannoch, is right--that the enterprise will run into difficulties. I have never known anything happening in the economy that did not run into difficulties. The question is whether those involved in taking decisions will be capable of learning from experience. Will they, on the basis of economic and monetary union, be capable of building upon it and developing methods which will deal with the problems that arise? I have no doubt that there will be regional problems and regional unemployment problems.
One of the matters that troubles me about the unemployment in our country is that we do not get rioting in the streets. I wish that we did have a bit of rioting in the streets so that politicians might be less anxious to create unemployment. I thought that the noble Lord, Lord Tugendhat, was right in what he said about his noble friends. He should know that I, at least, was not happy to pay the unemployment price of getting down inflation, for obvious reasons: I did not pay. I have never been a believer in advocating others to pay the costs when I get the benefit.
I do not believe for one moment that as Europe advances the relevant decision makers, whom I regard as still and continuing to be national leaders, will behave in the foolhardy, straitjacket way that the opponents of this new development have said that they will. One noble Lord--either the noble Lord, Lord Pearson of Rannoch, or my noble friend Lord Stoddart of Swindon, with whom I always want to agree--said that he hoped to have a great many more debates of this kind. I end by saying that I hope we do not.
6.15 p.m.
Lord Beloff: Perhaps after that intervention by an economist, with the typical irresponsibility of that profession, I can bring the Committee back to considering the facts that we are discussing. One thing
that has struck me about previous speeches, especially those made by my noble friend Lord Tugendhat and the noble Lord, Lord Taverne, has been that there is this picture of a Europe--if you like 11 countries of Europe--determined on creating economic and monetary union, and about to achieve that within, I agree, a matter of weeks.The fact that that may come about in a matter of weeks should not disguise what seems to me the most neglected part of the discussion hitherto, which is the fact that none of the 11 countries is doing it for the same reason or approaching it in the same frame of mind. There are exceptions. If nothing like this had come about, it is conceivable that the Netherlands, with its position as the output point for German industry, might have felt that it was happy having the same currency.
If we go outside the narrowest core, we find different approaches, and those are manifest to us through the discussions that go on. After all, we learn from the Bundesbank and various German statesmen that the ideal for which they are aiming is a European monetary system, controlled by a European bank which would be as like the Bundesbank as possible, and determined to make the curtailing of inflation its main purpose and objective.
On the other hand, the French--without a Franco-German combination, we should not be looking at a European Union at all--look at it differently. They have consistently said that there must be political input into these discussions, and even so great a Euro-enthusiast as the noble Lord, Lord Grenfell, admits that the stability pact will operate only under certain political controls; it will not be automatic.
They have not, as far as I know, been able to agree on who should hold the important post of president of this new bank, as though there were a contest in this country as to whether Mr. Eddie George, with his well-known opinion on various economic matters, or some other person, holding totally different views, should occupy the post at the Bank of England.
Should not we at least agree that it is a system which is constructed by different countries, for different reasons, with different measures of popular consent? It is well known, and has been referred to by various speakers, that a test of public opinion in, let us say, Germany will produce a negative, and a test of public opinion in Italy will produce an enthusiastic positive. Should not that be a warning?
My noble friend Lord Howell of Guildford referred to the case of Ireland, which has hitherto, of course, done very well out of being a sort of pensioner of the European Union, and obviously is enthusiastic for further immersion into that system. But what will happen if Ireland goes in and the UK stays out, as a great deal of Irish trade, and Irish economic relations, are with this country? They will be part of a euro which is likely, according to many respectable economists--perhaps not the noble Lord, Lord Peston--to be a rather weak currency, while it looks as though sterling will continue to be a rather strong currency. So they will find
themselves in a position which they do not share with other countries for which the UK is not of particular importance as an economic partner.We must recollect that the idea of popular participation in decision, which some noble Lords seem to believe would be important because they want the country to be enlightened, is not and cannot be a feature in many European countries. I very much doubt whether walking around the streets of Seville or Granada one will find anyone who can explain in detail what is meant by a single European currency. In most countries, as with the other aspects of this European venture, a limited elite are enthusiastic since they occupy positions of power in government and in the economy and they see this as a way of increasing their positions of power.
It is not therefore a very hopeful prospect. We heard the metaphor about a train rushing along and we were told, "You cannot stop the train". I agree that we probably cannot stop the train; folly is endemic in the human condition. All I worry about is the maiden who is strapped to the sleepers--this country--and I should like to detach her. That is the only consideration which I believe should influence us. What worries me is that we have deciding this matter for our country a Chancellor of the Exchequer who takes the extraordinary view that politics is one thing and economics is another; that you can settle something on what he calls "purely economic criteria". I do not believe that Adam Smith would have had much sympathy with that point of view and therefore I worry for our maiden.
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