Exchange Rate Mechanism

Part of the debate – in the House of Commons at 7:24 pm on 23rd October 1990.

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Photo of Henry Bellingham Henry Bellingham , North West Norfolk 7:24 pm, 23rd October 1990

The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) has taken us on an intriguing historical tour. I am sure that he was as amazed as I was to hear an hon. Member on the left wing of the Labour party advocating a single European currency. I wonder why the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) did that. Is it because he knows that the reforms introduced by the Government—the entrenchment of the free market and the complete reform of the trade unions—cannot be overturned by an incoming Labour Government but could be overturned by centralisation through Europe? That is why the hon. Gentleman has done a complete about-turn. His speech provided us with a fascinating insight into the thinking of some on the left wing of the Labour party.

I support the Chancellor's policy of entry into the ERM. I feel that we should have entered the mechanism somewhat earlier, and we heard a fascinating speech from my right hon. Friend the Member for Blaby (Mr. Lawson) in that regard. I have a feeling that much of my right hon. Friend's policy depended critically on earlier entry into the ERM. Perhaps if we had entered earlier inflation would not have taken off as it did and perhaps we should not have the very high interest rates that we have at the moment. That is all speculation. I welcome entry, with certain reservations.

The firms in my constituency also appear to welcome entry into the ERM. Many of them are light industrial businesses, some of them small—and many of them now export their products to Europe. They are very pleased that they can now have much more firm ideas about the position of our currency. In the past, far too much management time was taken up in playing the currency markets and in hedging the currency. Firms now know where they stand, and that will enable them to compete better with their European counterparts. They are feeling the pressure of high interest rates, and they certainly welcome the recent 1 per cent. cut in interest rates.

Some firms in haulage, construction and retailing are feeling the pinch especially badly. Haulage firms are extremely worried about rising fuel costs, although the position was ameliorated somewhat by the fall of a few days ago. The Treasury must be rubbing its hands with glee in view of the increase in revenues from taxation on fuel oil. Could not some of that extra money be forgone? Could not the Treasury ensure that the Government continued to take what they were taking before while reducing taxation on fuel oils? That would help many firms in Norfolk. I know that my hon. Friend the Paymaster General is listening carefully because he has similar firms in his constituency, and they are also concerned about the rise in fuel costs.

We are at an important crossroads and this debate brings into sharp focus the question of where we go from here. We could follow the Jacques Delors route towards an integrated federal states of Europe, but I believe that it is riddled with pitfalls and has serious disadvantages. For a start, there would undoubtedly be a major derogation of sovereignty. I am in favour of derogating sovereignty over certain matters. The environment is a case in point because pollution knows no frontiers or boundaries. But the derogation of political control and contol in foreign policy matters that would undoubtedly flow from economic integration would be a grave disadvantage. Moreover, it would emasculate the sovereignty of the Queen in Parliament. That matter has not been touched on today except by my hon. Friend the Member for Stafford (Mr. Cash).

If we follow the Delors route, we shall have a centralised bureaucratic power. We shall have a form of market socialist control. Of course Jacques Delors wants that; he is a market socialist. Of course he wants power at the centre. If we follow his route, we shall have a close-knit, inward-looking club that will not want new members coming in from outside. It will be far more difficult for countries such as Hungary, Poland, Czechoslovakia—the newly emerging democracies—to come into Europe.

Advocates of a federal European solution have already said that they do not want Europe to expand too quickly. Indeed, my right hon. Friend the Member for Henley (Mr. Heseltine) spoke in those terms the other day. Furthermore, if we follow the Delors route, our relations with America and the advanced Commonwealth countries would also be jeopardised and any idea that we could form closer trade links with those countries would be imperilled.

Many people have no idea what all this means and there is a danger that we will sleepwalk into a federal states of Europe. Jacques Delors has already said that he wants a federal Europe by stealth, and that worries me. People should know what is happening and that this Government advocate an alternative route to the Delors route. They advocate entering ERM and drawing lines under it stating that there should be not one single step beyond it.

I could certainly go along with a hard ecu. I do not want to go any further than that because a loose grouping of sovereign states have control over their own destinies. Their traditions and characters can be seen at their best. That is the way forward. Today we have heard nothing about the single market. It is crazy to begin to talk about going further forward until we get the single market to work. The United Kingdom is at the forefront in implementing the 230-odd measures for the single market.

In fact, we are well ahead of many of our European counterparts in that regard. However, until we get that process moving, even to consider stage 2 is ludicrous.

We should advocate the alternative course. We would have control over our foreign policy and over so many other aspects of domestic policy which would disappear out the window if we were to opt for the federal solution. Consider the current mess in the CAP and the discussions intended to sort out farm prices. It is clear that there is a complete shambles there.

If we are considering seriously derogating our foreign policy to a group of countries whose response to the Gulf crisis was supine and pathetic, we should think again and consider the consequences of the policies advocated by the so-called federalists.

We are at a very important crossroads. There should be far more opportunities for the people of this country to decide their future. The House must decide where we go from here and there should perhaps be a referendum. In today's debate some political hatchets have been buried, and that is very comforting. ERM membership is a momentous step forward, but the steps that are likely to be taken after entry will be far more momentous. This is indeed a time to bury political and party-political hatchets. Anyone who, like me, believes passionately that we should not go a single step further should vote for the future generations of this country.