Economic and Monetary Union

Part of the debate – in the House of Commons at 8:13 pm on 24th January 1991.

Alert me about debates like this

Photo of Bill Cash Bill Cash , Stafford 8:13 pm, 24th January 1991

The Gulf war that is going on at the moment has demonstrated a number of serious weaknesses in the way in which the European Community has been developing. In the context of this debate, it is important to remember that the system being proposed would effectively—through the interlocking of economic, monetary and eventually, I think, fiscal policy—have a dramatic effect on our capacity in future years to conduct a foreign policy such as we are engaged in now or a defence policy that would enable us to deal with a Saddam Hussein of the future.

I make this point with reference to the explanatory memorandum relating to the draft treaty on economic monetary union. I think that 1 am the only hon. Member—apart, perhaps, from Ministers—to have a copy. I do not want to go through it in detail, but I do want to quote these words: The joint exercise of new powers in areas in which reach to the very heart of sovereignty, such as currency matters and foreign policy, will require the existing institutional framework to be adapted to a higher degree of community integration. It could be said by some, of course, that this is nothing more than a Commission document, which should not be taken too seriously. If one were to take a fairly relaxed view of these matters, one might adopt that attitude. On the other hand, the evidence of the engrenage that has taken place within the Community over the past 15 years indicates that the real muscle—the forward drive for the progressive realisation of economic and monetary union—has lain very much with the Commission. This is what some people believe to be progress.

It is therefore relevant, in the context of the current dramatic events in the middle east, to consider very briefly what would happen if we were faced with this interlocking monetary and economic system in relation to the proposal for a central bank, in which case we should have, effectively, unelected bankers running these policies. That would reduce our ability to determine the economic and social priorities, including defence. We should have to ask ourselves what impact that would have on our ability to respond to a threat similar to that posed by the activities of Saddam Hussein and Iraq.

Bearing in mind the fact that economic and monetary union, together with foreign policy, lies at the heart of the sovereignty question, I should like to mention that, at the meeting of Foreign Ministers on 4 January, Mr. Roland Dumas is reported by The Economist as having snapped: If the European Community had majority voting on foreign policy you would be outvoted. One can therefore understand the relationship between political union and economic and monetary union. As has been said during the course of this debate, one cannot really separate them. For practical purposes, once one has moved to economic and monetary union one is on the threshold of, if not right into, political union.

We saw what happened yesterday in the European Parliament. A six-hour debate on the Gulf crisis broke up in confusion. Newspapers reported Mr. Jacques Delors as having put an imaginary pistol to his head and walked out in disgust. I do not take any pleasure in this, nor do I take any satisfaction in saying, as many hon. Members have said from time to time, "I thought that this might happen."

The reality is that it is a matter of immense importance for the future of this country that we should not make any mistakes in this respect. If, for example, the European Community, had a common defence policy—a proper defence policy along the lines of that of the United States—its current average expenditure of 3·1 per cent. of gross domestic product would have to be just about doubled. Incidentally, in the United Kingdom at the moment the figure is about 4 per cent. The extra resources would have to be produced via taxation, which would inevitably have to be drawn from the member states.

To achieve defence at the level of that of a country of equivalent standing, such as the United States, taxation would have to be raised to that extent through the processes of economic and monetary union and fiscal policy, and I just do not believe that the individual member states would wear that. Individual contributions for defence by way of the percentage of gross domestic product, are way below the British contribution. That is a point that we must bear in mind.

I repeat that there is nothing anti-European about my attitude to the various questions. I was the founding member of Westminster for Europe and I want the EC to work, but I do not want to see the whole thing disintegrate as a result of embarking on policies which are essentially impossible and unreal and which, in the context to which 1 have just referred, are potentially dangerous. I have no doubt that the British people, looking at the state of affairs in the Gulf and the almost non-existent contribution that has been made by other member states, would be deeply concerned if they thought that the proposals for EMU could or would have an impact on our defence policies in the Gulf or elsewhere in the future.

If there were an increase in the amount of money spent on defence in percentage terms, it follows that there would be a corresponding decrease in the amount of money available for other areas of public expenditure. That in turn would cause grave difficulties which would probably have something to do with the arguments that were raging in the European Parliament yesterday. There are serious questions about the economic, social, defence and public expenditure policies that would be pursued under the regime that has been postulated by the Commission in its draft treaty. The same could be said of the proposals for a single institutional structure, or political union, which have also come from the Commission.

Our proposals entitled "Possible treaty provisions and statute for a European monetary fund" were published in January 1991 and have been presented to the House. I put my observations in the form of questions, a number of which arise. For example, article II says: The overriding objective of the European Monetary Fund shall be to promote and maintain price stability in the Community as part of the progressive realisation of Economic and Monetary Union. It goes on to say: Without prejudice to the object of price stability"— which many economists would say is extremely difficult to define, and is not well defined in any of the Commission documents, but is generally taken to mean that inflation will be kept as low as possible— the Fund shall support the other economic policy objectives of the Community. The question is, what are the Community's economic policy objectives? Is there not an invitation, as my hon. Friend the Member for Esher (Mr. Taylor) suggested, to massage the present arrangements proposed under the document into what he would like, which is the Euro Fed arrangement.

I hope that my right hon. Friend the Chancellor of the Exchequer with whom I have had the pleasure of discussing—