I did not say that.
I welcome very much the fact that the Gracious Speech does not outline too heavy a programme of radical legislation. No doubt there will be sufficient in the Gracious Speech to keep the House busy, but not too busy to prevent it from spending more time debating the broader issues of foreign and domestic policy, which are of much greater significance to the future of this country than much of the legislation that passes through the House.
The most important legislation which the House will consider in the coming Session is the Bill to implement the Maastricht agreement. As a passionate believer in the European Community, I welcome that legislation as a further step toward the strengthening of the Community. The Maastricht agreement confirmed the commitment in the treaty of Rome to
an ever closer union among the peoples of Europe",
but, significantly, it added
where decisions are taken as closely as possible to the citizens",
thus incorporating the principle of subsidiarity into Community legislation and practice. It is a principle that is widely accepted throughout the Community. It makes it clear that greater unity does not necessarily mean greater centralisation.
The Maastricht agreement also extends the legislative role of the European Parliament. I have never understood the attitude of opponents of membership of the European Community who criticise its lack of democratic accountability but, at the same time, are opposed to strengthening the European Parliament. Elected Parliaments are surely about democracy or they are about nothing. I understand that the Maastricht legislation will be introduced in the near future. I hope that it will have a trouble-free and speedy passage through the House, particularly as it will either immediately precede or coincide with Britain's presidency of the European Community.
Although Britain is not committed to joining a single currency under the Maastricht agreement, it is obviously desirable that we should do so. If we are able to do so, it is essential that our balance of payments problem should be resolved as quickly as possible. The current account of our balance of payments has now been in deficit for more than five years. The deficit peaked at more than £20 billion in 1989. It is estimated at £6·5 billion for this year. Although that is an improvement on 1989, it would be wrong to conclude that we can sit back and assume that the balance of payments will right itself in the next few years.
During the past three years economic growth has been strongly braked back. The economy has been in recession. In a recession the current account of the balance of payments improves. Imports of raw materials and manufactured goods fall, or at least stop rising. Firms with short domestic order books are forced to be more active in export markets—no bad thing in itself—and exports rise. Lower imports and higher exports combine to reflect a smaller deficit, or even a small surplus, but as soon as the economy starts to expand again the process goes into reverse. That has happened too often in the past to assume that it will not happen again this time. On top of that there is the fact that, although the reduction in the deficit is welcome, the deficit is still too large for an economy which is in recession.
The length of time that our current account has been in deficit and the size of the deficits suggest that there is something fundamentally wrong with the exchange rate and that the value of sterling is too high in relation to other currencies. As a consequence, British exports are dearer than they should be and therefore more difficult to sell overseas, while imports are cheaper than they should be and therefore easier to sell in this country.
In such circumstances, a downward adjustment in the value of sterling is both necessary and desirable. Of course, we are now in the exchange rate mechanism of the European monetary system and our freedom of manoeuvre is limited. I have supported British membership of the ERM for many years and I was delighted when we joined in 1990 when my right hon. Friend the Prime Minister was Chancellor of the Exchequer. Membership means that, for 60 per cent. of our trade, British importers and exporters enjoy the advantage of reasonably stable exchange rates. Importers know what they will pay and exporters know what they will be paid.
That is particularly advantageous for the manufacturing sector. Membership of the ERM is also an important tool in the battle against inflation. It is not just coincidental that the breakdown of the Bretton Woods regime of fixed exchange rates was followed by galloping inflation in Britain and elsewhere.
As one strongly committed to British membership of the ERM, I have no desire to undermine it, but it would have been strange if Britain had joined at exactly the right rate for sterling. Given the size and nature of our current account deficit, there is a strong case for an adjustment in the value of sterling within the mechanism. It would have to be a one-off adjustment. It would have to be made clear that it would not be repeated. Therefore, there would be no reason for anyone to believe that the discipline of the ERM would be undermined.
The adjustment would aim to ensure that sterling was at a level at which the current account of our balance of payments would be in balance in an average year. British exporters and importers would enjoy the advantages of stable exchange rates in their trade with other European countries. Britain would enjoy the benefits of the anti-inflationary discipline of sterling fixed in the ERM. British interest rates could be lower because they would no longer be required to maintain sterling at an artificially high level. The economic prospects for Britain would be set fair for the next few years. We would be in a strong position to join a single currency later this decade.
I would like to touch on one other subject for a few moments—the situation in Scotland. I was pleased that the Conservative party did better than anticipated in the general election in Scotland and that it improved its position compared to 1987. But it got only 25 per cent. of the popular vote, and there is no point in pretending that it was other than a bad result. Although disproportionately large sums of central Government money have been and are being spent in Scotland, there is a great deal of evidence to show that the Government are out of touch with the mood of the Scottish people. Therefore, there is no room for complacency in the Conservative party about Scotland.
Obviously, the election result does not mean that the Government have no right to govern Scotland, any more than the failure of the Labour Governments of 1964 and 1974 to gain more votes in England deprived them of the right to govern England. It is as well to remember that we are still a united kingdom and that all the parties in this House, except for the nationalists, are committed to the Union. Although the Government have a right to govern Scotland, I hope that they will try to understand and respond to the hopes, aspirations and fears of the Scottish people.
I welcome the remarks of my right hon. Friend the Prime Minister this afternoon, but I ask the Government to look again at the question of devolution. I supported the Labour Government's devolution proposals in the 1970s and I have never regretted doing so. I am worried that, if the Government continue to ignore the desire of the Scottish people to have a greater say over their own internal affairs, we may end up with a much more serious problem than we have now. Far from undermining the Union, devolution to Scotland would strengthen it. If the principle of subsidiarity is right for Britain in the European Community, surely it is also right for Scotland within the United Kingdom.