Exchange Rate Mechanism

Part of the debate – in the House of Commons at 7:32 pm on 23rd October 1990.

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Photo of Mr Julian Amery Mr Julian Amery , Brighton, Pavilion 7:32 pm, 23rd October 1990

I should like at once to congratulate the Government on their decision to join the exchange rate mechanism. I do not think that it will do much to help our inflation, but it is of great importance in a broader sense. Unless we had joined, we could not really have had a seat at the table and discussed the future of the monetary evolution of the European Community. That matter is immensely important to us and will be before us next month. We could not really have gone to the December talks and made any sense unless we had been in the ERM, nor could we really talk seriously about the reconstruction of Germany and eastern Europe. That will require more than German effort; it will require European and, I dare say, American effort as well, bearing in mind all the difficulties that our American friends have and the extent to which they can afford to help.

We must not underrate the impact on the existing ERM of the burden that will have to be taken up in the reconstruction of Germany and eastern Europe. I do not think that even in Bonn people yet have the foggiest idea of how much it will cost them and, in turn, how much it will cost us.

We now belong to a deutschmark zone, as foreseen by my hon. Friend the Member for Horsham (Sir P. Hordern) in a pregnant article in The Spectator quite a long time ago. That brings us to what we might call the German peril. My right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), in his famous interview in The Spectator, and my hon. Friend the Member for Stockport (Mr. Favell) have drawn attention to their views on that matter. All hon. Members have been aware of the problem. The question is how we are to meet it. Do we meet it best from being inside the Community, where we may find allies if need be, or do we meet it better from being outside and alone, or almost alone? If the Americans have a penchant for any other special relationship, it is indeed with Germany. We must ask ourselves a simple question: would we prefer to have our financial affairs dictated by the Bundesbank or by some agency over which we have some influence, limited though it may be?

The German Chancellor, for whom I have the greatest regard, has been setting the pace, both in respect of the common agricultural policy and now the timetable for the agenda of the forthcoming meeting in Rome. He has said that the second stage of the approach to European monetary union should be in 1994. I ventured to interrupt my right hon. Friend the Chancellor of the Exchequer to ask whether, instead of just saying that we did not like the idea or that we had good grounds for not liking it, we could say, "Okay, 1994, if you accept the hard ecu proposal." It is perhaps an opportunity.

May I now say a word about the problem of sovereignty? There is a widespread feeling in the House that, if we are not careful, we shall go down a road that will turn the House into something that is not much more than a glorified county council. What is sovereignty? It is total freedom to do whatever we wish. It existed, I suppose, in Britain in the days of Palmerston. General de Gaulle tried to achieve it for France, with his policy of defence against all horizons. But what does sovereignty mean today?

One or two distinguished speeches—for example, by the right hon. Member for Bethnal Green and Stepney (Mr. Shore)—were about seeking the right to inflate or devalue. There is here a very respectable case—I am not joking about it. William Jennings Bryan said: you should not crucify mankind upon a cross of gold. Keynes said that, in certain circumstances, it might be desirable to reflect the economy. That could happen again, but it does not seem likely at the moment.

I wish to relate all that to something. For several generations we were on the gold standard. The gold standard worked extremely well for a long time, but it produced industrial and social disadvantages that were so serious that, in 1931, we opted out. The moral that I am trying to draw is that the House of Commons does not surrender sovereignty. Nothing that we decide today can bind another Parliament, and nothing that we do can bind another Parliament. Another Parliament can make other decisions, just as happened in 1931 when Parliament decided to abandon the gold standard and we moved to the sterling area. That committed us to certain obligations, as well as conferring certain advantages. When in the 1970s the obligations became heavier than the advantages, we and some of our partners decided that we had had enough.

Nothing that we decide here is irrevocable. If we do not like what is put before us at the next stage of European monetary union, we need not sign it. If we do sign it and it does not work, we can pull out. We did that with the gold standard, with sterling and with the empire preferences. The French did it with NATO. No Parliament can bind another unless the latter is occupied by enemy troops. If anybody thinks that our present Secretary of State for Defence or our Home Secretary are shock troops for Delors, he or she had better think again.

When considering the next stage of European monetary union, the test that we must apply is whether there is a better road or an alternative policy that would suit us better. Is there a "better 'ole?" That is what we must examine in some detail. I agree with my right hon. Friend the Member for Blaby (Mr. Lawson) that we are a long way from any sort of federal arrangement in Europe. We need only look at the response of the different members of the Community to the crisis in the Gulf where there was no sign of federal co-operation.

Much has happened since the Paris-Bonn axis was first created in the days of de Gaulle and Adenauer when the French were convinced that they would be the jockey riding the German horse. There have been enormous changes: German union, the liberation of eastern Europe, the disintegration of the Soviet Union and the recession in the United States, to say nothing of the middle eastern crisis. Today, everything is in flux and no blueprint that has been produced by Delors or anybody else is acceptable. I do not know whether there will be a single currency unit. Whose image or whose superscription will it bear? As to a single bank, we shall be lucky if we get a single reserve bank. However, with our experience of the sterling area and the world economy, we would do better if we were in on the act and able to contribute as much wisdom as we can and as we have both to our advantage and to the general advantage.