European Community

Part of the debate – in the House of Commons at 7:45 pm on 26 June 1991.

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Photo of Mr Robert Sheldon Mr Robert Sheldon Chair, Public Accounts Committee, Chair, Public Accounts Committee 7:45, 26 June 1991

I start by agreeing with the right hon. Member for Blaby (Mr. Lawson) that this debate has indeed been impressive. It is right that the clear differences that we have heard within each side of the House have been expressed in the way that they were by the right hon. Member for Finchley (Mrs. Thatcher), who praised the Government but certainly disagreed with many of their policies, and by the right hon. Member for Old Bexley and Sidcup (Mr. Heath).

The central issue is whether we wish to remain a country enmeshed within the Community. If we do, we have to pay some attention to the wishes of other members, particularly when we find ourselves in a minority of one. Such a minority position is not a matter for rejoicing, as the former Prime Minister seems to think; it is a matter for great dismay.

If we play such a part in opposing what other countries want, in the end they will find ways of managing without us. The story of the dog in the manger did not end with the dog for ever denying food to the hungry; there are ways of dealing with such a dog. That role can operate only for a limited time. We could find ourselves bypassed. Once again, we could find ourselves excluded.

Why is it that other countries seem to see such advantages where we see few or none? Let me detail some disadvantages. My principal opposition to EMU is that we are a country economically much weaker than the Government seem to think we are. We need to restore our manufacturing industry to the comparable levels of the past and comparable levels with Germany. In fact, if we had an economy as flourishing as Germany's, I would be a whole-hearted supporter of the EMU. The system of a central bank in Europe, leaving aside the control of it, will favour the powerful economy. I only wish that that was us. Even if policies were wise and far-sighted, there would be great time lags in their results. The public expect earlier successes than even the most enlightened programmes can provide, and elections come round before even the most far-seeing policies can deliver.

What are the prospects for a European central bank? Britain would, of course, have a representative, and the bank might have to report to a group of Finance Ministers. Controlling a central bank in one country is difficult enough. I recall a Chancellor of the Exchequer envying the role of the Governor of the Bank of England. There is the day-to-day tussle even when it is nationalised. Nobody can doubt the present Chancellor's problems with the Governor. In Germany, as we know, it is even more difficult.

Why did we nationalise the Bank of England? Why did it get the support of prominent Conservatives such as Bob Boothby? It was because the lack of control was obvious. An international bank with immense powers would supposedly be controlled by people from different countries with different views and different languages. Since when have politicians been prepared to hand over such authority to such a powerful bank or to give it authority in the day-to-day running of monetary affairs for the whole of Europe? We cannot be sure that our Prime Minister will be as powerful as the chairman or the governor of such a central bank.

The trouble is that the major loss to the independence of the United Kingdom would be its ability to set our exchange rate. My right hon. Friend the member for Leeds, East (Mr. Healey) is correct: one cannot have complete control over one's exchange rate, but one can have some. In an area where there is so little control, that little is certainly of value. The case of East Germany is a problem writ large. If it is bad for us, how much worse would it be for a country like Portugal or Greece?

The role of the exchange rate is crucial to the conduct of economic policy. If one could separate the economic controls that one can devise, I have always held, "Let me control the exchange rate and you can have everything else." The economic performance, the balance of trade and balance of payments desperately depend on the role of the exchange rate, which would be the responsibility of the managers of monetary union. Such a monetary union could not work for long in the way that enthusiasts for it expect.

Even in the old East Germany the only prospects for success—in their exchange rate equalisation with western Germany—lie in an enormous outpouring of funds from West Germany for 10 to 15 years before it will have the advantages of West Germany. That is the position when the two are part of the same country, sharing the same language and culture. In the Community of the future, such massive movements of capital are, to say the least, unlikely. In the absence of those, the Community cannot accept a central bank which would provide gains to the wealthy at the expense of losses to the poor.

Of course we want convergence, but it will take a long time and will require certain political decisions which many countries will find distasteful. However, we are not the only people who are claiming to see into the future. Such a commonplace observation must be occurring to people in the other 11 countries. If those economic laws are certain, they will be so proved and will result in changes within the Community.

I do not believe that there are industrial dragons in other countries waiting to do us down. If Europe is not a co-operative venture, it is nothing; it will collapse under its own deceptions. The Community has to convince each participant of the advantages to them. That is why so many countries in Europe, outside the Twelve, want to participate in and to join the Community, and we must welcome that fact. The future of the Community must lie in co-operation—without co-operation it is bound to disintegrate. The trouble is that the determined non-co-operators reside within our country.

There comes a time in any organisation when the impetus for change is so great that to resist it means the ultimate exclusion of the dissenters. It is far better to point out the difficulties, discuss the problems and assume our rightful place in the field of consultation and deliberation and so use our influence for good as well as for the common good. That is why it will be necessary to ally ourselves with other Community countries, which will eventually come to realise the dangers, including those of federalism, and construct new ways to provide for such an authority.

We have to decide our future on the basis of what we may be giving up and of what we may get in return. Is it the right to an independent destiny? The real great British disease lies in comparative analysis, when we compare our hopes for the future with the present performance of others. Such words as "economic miracles" and "Germany, watch out" play a large part in this Walter Mitty world. Meanwhile, we maintain absurdly high interest rates, which are inflicting great and lasting damage on our manufacturing industry. Reducing interest rates may weaken our position in the exchange rate mechanism, but that is a risk which we should be prepared and willing to take.

It is a pity that the right to continue our own, if disastrous, economic policy is seen as the right to control our own destiny. That so-called "right to our own destiny" has to be offset by the danger of failing to play our full and proper role in a Community which has consistently been more flourishing than we have been on our own.

We still have certain advantages, but we have failed wretchedly to make the most of them. Probably our greatest benefit is that we share the language of the United States of America and the geography of western Europe. Our position as a bridge between them ought to have been of immense advantage to us. By playing a full and less reluctant role we could still use some of those advantages which we possess even yet.