Treaty on European Union

Orders of the Day — European Communities (Amendment) Bill – in the House of Commons at 3:35 pm on 24 March 1993.

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Amendment proposed [11 March]: No. 32, in page 1, line 9, after 'II', insert '(except Article 171 on page 46 of Cm 1934 relating to the European Court of Justice.)'.—[Mr. John Morris.]

Question again proposed, That the amendment be made.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

I remind the Committee that we are also considering the following amendments: No. 228, in page 1, line 9, after 'II', insert 'except Article 172'.

No. 329, in page 1, line 9, after 'II', insert '(except Article 168a on page 46 of Cm 1934)'. No. 330, in page 1, line 9, after 'II', insert '(except Article 171 on page 46 of Cm 1934)'. No. 331, in page 1, line 9, after 'II', insert '(except Article 172 on page 46 of Cm 1934)'. No. 411, in page 1, line 9, after 'III', insert '(except Articles 32, 32(d) and 33 on pages 64 and 65 of Cm 1934).'. No. 416, in page 1, line 9, after 'IV', insert '(except Articles 137, 140a, 143 and 146 on pages 73 and 74 of Cm 1934).'. No. 152, in page 1, line 10, after '1992', insert 'but not Article 143 in Title IV thereof.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South 3:55, 24 March 1993

On a point of order, Mr. Morris. I apologise for not giving you notice of this point of order. Will you enlighten the Committee and me about the content of amendment No. 456, which relates to the function of the European Court of Justice? We are now discussing the group of amendments in relation to article K.3(2)(c) and its application to articles L to S of the treaty.

I appreciate that article K and articles L to S are part of the alleged intergovernmental section of the treaty, which may not have direct and immediate legislative effect, but I think that you will agree that in article K.3(2)(c)—consequential on a convention which could be before the House at a future date—the jurisdiction of the European Court of Justice does apply. As the amendment has not been selected, will it be possible to refer to this aspect of the European Court of Justice in the debate, or would it be more appropriate to table the amendment again, in another form, at a later stage of the Bill?

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

If the hon. Gentleman catches my eye, I am sure that he is ingenious enough to incorporate the matter in this debate.

Photo of Geoff Hoon Geoff Hoon , Ashfield

There has been a good deal of discussion lately about the Government's timetable for the progress of the Bill. They are clearly speeding up because on a previous occasion it took me three weeks to move from the beginning of one speech to the conclusion of another. This speech has taken a mere 13 days from when I began it to when I hope to finish.

On that occasion, 13 days ago, I invited the Attorney-General to explain how he sees the jurisdiction of the European Court of Justice in the light of Britain's opt-out on the protocol on social policy. If other member states go ahead and legislate under the protocol—as legally they are entitled to do—what effect will that have on the case law and precedents of the European Court of Justice? Will it mean that there are two separate legal systems of case law in the European Community for the European Court of Justice: one for the 12 member states that will include the United Kingdom, and another—concerned particularly with social policy—for the other 11 member states that will have passed directives and established cases under that process?

Ultimately, that is a matter for the European Court of Justice, but there is a matter which affects courts in the United Kingdom because, under the European Communities Act 1972, they are bound by decisions of the European Court of Justice. Which series of precedents would the United Kingdom courts be bound by?

Photo of David Winnick David Winnick , Walsall North

My hon. Friend prefaced his remarks with a reference to the last time that he spoke. Although we may have different views about the Bill, does he agree that it is important that there should he careful deliberation in Committee of the amendment, any future amendments and new clauses? Is my hon. Friend aware that some people believe that the Government are determined to push the debate through the night—either through the entire night, thereby possibly destroying the next day's business, or very late—and that it all depends on support from the Liberals and the nationalists?

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

Order. That has absolutely nothing to do with the amendment.

4 pm

Photo of Geoff Hoon Geoff Hoon , Ashfield

I was referring to United Kingdom courts. If they are bound to follow the decisions of the European Court of Justice, how will they know which series of precedents to follow? Will they follow decisions taken under social protocol directives, where cases have been decided by the European Court of Justice or the other 11 member states, or will they follow the series of cases established by the Twelve? That is a point for the jurisdiction of the European Court of Justice and, as a consequence, for United Kingdom courts. If the Attorney-General intends to sum up, I should be grateful if he would give some thought to the matter so that we can consider it afresh.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

I may be able to help the hon. Gentleman at this stage of the Committee's deliberations. He will agree that the protocol is quite clear that Acts adopted by the Council under it shall not be applicable to the United Kingdom. It therefore follows that any judgment that the European Court of Justice may give on such an Act would not be applicable to the United Kingdom. Any measure under the social protocol will not be Community law as such because its basis will be not the Community treaties but the agreement of 11 which flows from the protocol itself.

Photo of Geoff Hoon Geoff Hoon , Ashfield

I am grateful to the Minister for that reply, but I am not sure that it entirely deals with the problem. I was referring to the situation that arises when cases go all the way to the European Court of Justice. They are not minor cases but, as the Minister will agree, are usually landmark decisions where the court is not merely considering the intention of a particular directive. The protocol allows European Community institutions to be used to interpret case law in that way and, presumably, therefore allows the European Court of Justice to be involved. In those circumstances, when the court gives a decision, it is not merely giving a decision on one directive made under the protocol but will be reviewing the relevant cases in that domain.

Many of those cases will have been decided by the court when the United Kingdom was participating fully in the process of European Community law. Under the protocol, with the United Kingdom on one side—as the Minister said, that is the strict wording of the protocol—when the court has made a decision, it will have to be decided whether the United Kingdom courts and the European Court of Justice itself will follow it. I accept the strict wording of the protocol—the Minister was absolutely right to that extent—but I am more concerned about what the effect will be in terms of precedent.

It would be useful if the Attorney-General would comment. It would be curious if there were one set of cases which bound only 11 member states, because they had to do with a directive passed under the protocol on social policy, and another set of cases which included the United Kingdom. That is a point of legal confusion with which the Government must deal.

Photo of Mr Calum MacDonald Mr Calum MacDonald , Na h-Eileanan an Iar

Although the Minister is correct about the wording of the protocol, surely the protocol itself is part of the treaty of Rome in that it is annexed to the treaty of Maastricht. Any proposal annexed to a treaty that becomes part of the treaty of Rome itself becomes an integral part of the treaty of Rome. The Minister cannot say that it is simply intergovernmental because it is part of the treaty of Rome.

Photo of Geoff Hoon Geoff Hoon , Ashfield

That is right, although the Minister clearly wishes to comment.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

I think that the Committee will recognise that something else flows from the protocol—the agreement among the 11. That is an intergovernmental agreement. That is where any decisions that the 11 may choose to make would be taken, and it is outside the treaty.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

Does the hon. Gentleman agree that, far from having resolved the problem, the Minister of State may have created a new problem? In the event of a decision to eliminate the protocol from British law, but not from the treaty, so that it is not a Community obligation for the agreement of the 11, would it not be wholly illegal for the Government to seek to make payments of one twelfth of the cost of the protocol? Then we would be in a terrible mess, which only our courts could resolve. That would take a long time.

Has the Minister of State not raised an issue about which we should all think carefully? If the protocol is removed from British law, there should be no obligation to make payments for a Community obligation, for the simple reason that, as the Minister of State said, there is no Community obligation but an obligation of the agreement of the 11.

Photo of Geoff Hoon Geoff Hoon , Ashfield

I am grateful for that observation. I suspect that the proper answer is that, when we have an opportunity, as we hope we shall, for a further debate on the implications of the social protocol, it may be possible to deal with that point.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

It is over: it has already happened.

Photo of Geoff Hoon Geoff Hoon , Ashfield

Perhaps I may return—

Photo of Sir John Morris Sir John Morris Shadow Attorney General

A most important point has been raised in all seriousness. Perhaps the Minister, or the Attorney-General, would clarify the matter. Would such payments be ultra vires?

Photo of Geoff Hoon Geoff Hoon , Ashfield

Again, that is not a matter for me, but perhaps the Minister would like to try to answer.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

I shall try to assist the Committee. I do not know whether the right hon. and learned Member for Aberavon (Mr. Morris) was in the Chamber at the time, but the important question raised by my hon. Friend the Member for Southend, East (Sir T. Taylor) was dealt with on a previous occasion by my right hon. and learned Friend the Attorney-General.

Photo of Geoff Hoon Geoff Hoon , Ashfield

Perhaps I may leave that point now, and make some progress on what I was saying about institutional arrangements for the European Court of Justice.

Photo of Mr Tony Marlow Mr Tony Marlow , Northampton North

The hon. Member for Ashfield (Mr. Hoon) brings a great deal of skill and experience to our debates, and I am always interested in what he has to say, but is not the debate somewhat academic? I have just come back from Brussels, having visited the Commission, the European Parliament and other institutions, and I detected a gung-ho feeling there. People are concerned about ratification, but if and when the treaty is ratified they intend to go at full speed ahead—on the social chapter, among other things. They will say, "We want everybody to do it; we do not want those burdens to fall only on us. We want everybody to share in the glories, or the burdens, of the social chapter." The social protocol excludes the United Kingdom, so they will look for other ways to include us, via other routes through the treaty. Do not articles 2 and 3 of the treaty suggest that the European Court will be sympathetic to that approach, and that the protocol itself is therefore not a matter of great relevance? People will get what they want through other means, and the court will help them.

Photo of Geoff Hoon Geoff Hoon , Ashfield

That is certainly a possibility, and I shall develop that argument briefly later. Yes, the other 11 member states would like the United Kingdom to be fully part of that process—and the institutional difficulties that I have touched upon concerning the European Court of Justice arise equally in relation to the European Parliament, where there are moves to exclude British Members from participating in debates on social protocol questions. Clearly, that will create the institutional confusion across the Community about which I am now complaining in the context of the European Court of Justice.

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

If there is a strong political element in the European Court of Justice, does not the hon. Gentleman consider it likely that the Commission will make suggestions to the court so that legal rights may be created to force the social chapter upon the United Kingdom by the back door? May not pressure also be brought to bear on the United Kingdom to conform more readily to the convergence criteria and the various other mechanisms that may ultimately lead to a single currency?

Photo of Geoff Hoon Geoff Hoon , Ashfield

I am tempted to agree with the hon. Gentleman's conclusion, although I do not accept his premise, which was to suggest that the European Court of Justice is not independent of political pressures. I do not believe that the court would be likely to respond to an invitation from the Commission in the way that the hon. Gentleman suggests.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

I hope that I can assist the Committee. I think that I agree with the point that the hon. Gentleman is making. It is a mistake to assume that the European Court of Justice is bent upon bringing forward political judgments that are favourable to the centralising process.

As was made clear in an earlier debate, it is my contention, and that of the Government, that the position is changing. Only yesterday, the European Court of Justice issued a significant opinion on external competence. The Commission had argued that it had exclusive competence to negotiate in International Labour Organisation conventions. The court was of the opinion that that was a matter of mixed competence, in which member states have an important part to play. That illustrates the changed mood that the Maastricht treaty has brought about, not just in the court but throughout the Community.

Photo of Geoff Hoon Geoff Hoon , Ashfield

I am grateful to the Minister.

I was about to say that there was an inevitable tendency, however one interprets the political approach of the European Court of Justice, for it to become involved in institutional questions. In effect, it sits as a sort of supreme court for the European Community, and therefore from time to time has to resolve such delicate institutional issues. I intended to mention the external relations case and cases concerned with the legal basis of directives. Those matters might previously have been resolved between Governments at the political level. The European Court of Justice inevitably finds itself caught up in political, institutional and constitutional debates.

The court set out how it views its own responsibility. It described the European Community as a community based on the rule of law with a complete system of legal remedies and procedures designed to commit the Court of Justice to review the legality of measures adopted by the institutions. Clearly, the court sees itself as being at the centre of that institutional debate.

Photo of David Winnick David Winnick , Walsall North

I think that we agree that the role of the European Court of Justice is along the lines that my hon. Friend has suggested. That being so, if the Maastricht treaty is ratified, will not a time come—perhaps not too long afterwards—when the European Court of Justice may be asked to decide on cases brought by employees in the United Kingdom, who will argue that, if other countries have the social chapter, there is no reason why people in this country should not benefit from it? I shall not go into the rights and wrongs of the matter now; they will be decided later, and it will not be for us to decide them. We should not, therefore, reach the conclusion that the Government believe obvious, which is that, if the treaty goes ahead, the social chapter will not apply in Britain, because the European Court of Justice may decide otherwise.

Photo of Geoff Hoon Geoff Hoon , Ashfield

That is a possibility, and that will turn upon the way in which the court views the effectiveness of the opt-out on social policy.

An interesting case that is relevant to the whole question of the institutional responsibilities of the court was the ruling of the court on the EC-EFTA agreement. In looking at the structure proposed by the Commission and agreed by the Council of Ministers for the European economic area, the European Court of Justice took a quite different legal view from the political conclusions reached by the Commission and the Council. It said that the new treaty was clearly incompatible with the existing Community legal structure and was therefore unconstitutional.

The court was mainly concerned at that stage about the creation of a proposed EFTA court because it saw a potential rivalry between its competence and jurisdiction within the Community and the competence and jurisdiction of the proposed court to supervise the structure of the economic area.

What the court was concerned to do—this is significant—was to maintain a single and coherent jurisdiction. That was part of its reason for rejecting the approach agreed by the Commission and the Counci. If that is the case in terms of coherence, does it not follow from what I have been saying that the court might similarly be concerned about the lack of coherence created by the United Kingdom's opt-out on the social chapter? It seems to create some of the same difficulties from the point of view of a single structure for the European Community in the context of its legal system.

There are two potentially conflicting systems in operation, and while I accept the accuracy of the Minister's quotation from the social protocol, he could equally have quoted, in relation to the EC-EFTA agreement case, the decision that he and his colleagues in the Council of Ministers reached. The Court of Justice rejected that political conclusion and said that it was inconsistent with the structure that had been established.

An area in which the Maastricht treaty makes significant improvements is the ability of the European Parliament to bring proceedings before the court. That Parliament has faced difficulties in the past in asserting its institutional rights before the European Court of Justice. Although its vital institutional interests have been affected by certain court decisions, it has not always had the right to argue its case before the court.

4.15 pm

The Maastricht treaty significantly improves the position for the Parliament in that article 173 allows it to bring a legal challenge before the court for the purpose of protecting its prerogatives. The importance of that lies in the fact that it permits a democratically elected institution to assert its institutional rights against other European Community institutions. Similarly, article 175, as revised by the treaty, improves the position of the Parliament by allowing it greater scope to bring actions before the court.

Those changes are to be welcomed and I hope that hon. Members, whatever their views about the general institutional arrangements, will support a situation which gives a democratically elected institution the right to participate in court cases on an equal basis with the European Commission and the Council.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

It is always a pleasure to speak following the hon. Member for Ashfield (Mr. Hoon). We have discussed at length many issues about the European Court of Justice, on many of which we hold similar opinions.

I am concerned with amendments 329, 411, 416, 32 and 330, which relate to probably the most misunderstood part of the Community. When we started to discuss this group of amendments, the right hon. and learned Member for Aberavon (Mr. Morris) invited the Minister to comment on the philosophy of the European Court, and asked whether it was an interpretative and innovative court leading to centralisation. Those questions must be answered, and the Minister has not fully answered them. I shall demonstrate that the European Court of Justice is an innovative court, has drawn to itself greater powers, has enhanced the powers of the other Community institutions and, in so doing, has hastened what I believe is a movement towards centralisation.

When the Community's originators first set up the Court of Justice, their model was clearly the Conseil d'Etat of France. The choice of the Conseil d'Etat was no accident. Indeed, it was a significant act because it set the type and style of legal process for the Community. The importance of that role model needs explaining because the Conseil d'Etat has two distinct roles. It is both legal adviser to the Government and the supreme administrative law court, with competence to rule on any legal matter linked to, or arising from, administrative acts.

The consultation process of the Conseil d'Etat is compulsory in respect of Government measures and ordinances, and its opinions influence legislation. Its statements are never made public unless the Government so desire—we already begin to see some features of the court weaving their way through what is happening—so that the Conseil d'Etat has the ability to shape the direction of new legislation. Further, its anual report focuses on legislative reforms which it deems necessary and in the public interest. So there is a clear relationship between the Executive and that organisation. That is not surprising, because I note that, every year, the vice-president of the Conseil d'Etat presents the President of the Republic with new year's greetings on behalf of the civil service.

The role model for the European Court is a primary part of France's administration. I make those points clearly in discussing the power of the court to clarify how the court views its relationship with Community institutions and Community law, which is now being amended by the treaty of European union.

The originators of the European Economic Community ensured that the central ethos of the court would be more political than is the case in our common law law courts. That is reflected in appointments to the court. The treaties require that judges and advocates general should be chosen from persons whose independence is beyond doubt and who possess the qualifications required for appointment to the highest judicial offices in their respective countries or who are jurisconsults of recognised competence". It is significant that the independence of candidates is the paramount consideration, while professional qualifications and judicial experience are secondary. It is telling that, in the court of first instance, to which amendments Nos. 329, 411 and 416 apply, the criteria for judges' appointments is less rigorous even than that for the justices of the court.

There are great examples of judges not possessing any formal legal qualifications. Intriguingly, only a minority of appointees have had any judicial experience in their own countries. The majority come from different careers while holding merely formal legal qualifications. It is important to note that several judges have held ministerial posts in their own countries and that several others have been senior civil servants. Only three of the present judges have had judicial experience—[Interruption.] The present representative from the United Kingdom is not one of them.

Clearly, that range of previous experience goes well beyond purely legal qualifications and encourages the view that judges should rule on economic, social, administrative, fiscal and—of course, more and more—political issues within Community law. That the court has a clear conception of its role is evident when one looks at statements made by the courts advocates general.

The other evening, my right hon. Friend the Minister of State played down the role of the advocates general in the European Court. We are mistaken in doing that, because the advocates general are fully recognised as the court's external voice, and their opinions have proved an important element in the court's development. Seldom has the court disagreed with the advocates' opinion. As one authority put it: taken as a whole the opinions of the advocates general are as much a product of Community view, and of the esprit de corps which characterises the Court as a whole, as are the judgments themselves. That was given by J. Neville Brown, who wrote "The Court of Justice at the European Community".

By way of explanation, I shall cite a few examples of the esprit de corps of Community sentiment and where it leads. Advocate General Lagrange's opinion in the de Geus v. Bosch case was: the Court must not be defeated by obscurities or contradictions in the wording of the text for the real meaning can be deduced from the context or the spirit of the text". Thus, the court is competent, by reference to the "spirit" of the treaty, to fill those gaps. Such teleological interpretation has become an accepted practice in the European Court. In filling the gaps, the court de facto takes a legislative role. It makes law. I refer hon. Members to my earlier comments on the Conseil d'Etat. That is another linkage.

The European Court of Justice has a powerful role in establishing the direction in which Community law evolves. Furthermore, the court has no doubt as to which direction this legislation should take. Advocate General Roemer said: The European treaties are nothing but a partial implementation of a grand general programme dominated by the idea of complete integration of the European States. When we look at the court's judgments, it is plain to see that, in filling the legislative role, the court advances the cause of European nationhood. As Lasok and Bridge said: reference to the spirit or aims of the Treaties enables the Court to fill the gaps in the system and so to 'up-date' the text.In doing so, the Court has consciously acted not only as the Constitutional Court of the Community but also as an architect of European integration. The court has not been a protector of nation states' powers, as has been suggested previously. Nor has there been any change in the court's perception of its role. Progression of the European Court is slow at times, and is one of incremental revision.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

Would my hon. Friend care to comment on the opinion on international labour organisations which was issued by the European Court only yesterday? If nothing else, I think that it gainsays the point, and shows that, at least recently—certainly since the agreement in Maastricht—the European Court of Justice is increasingly sensitive to and taking account of the position of member states.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

Yes. That is an important point to make. I shall come to it further on in my speech. I talk continually about the fact that the European Court of Justice never moves back on its judgments but always moves forwards, sometimes at a slower pace, sometimes at a faster pace. It takes into consideration what is going on in a general sense politically, but the process is always the same.

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

The irony of the Minister of State's interruption is that it completely demolishes his point that the European Court of Justice is an independent, apolitical court. All he said was that observations of a political nature had been made throughout the Maastricht process, and that the court now took account of those political views. It is a political court, even though he happens to approve of the political pressures which are now being applied to the court.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

My hon. Friend summarises that point well. It stands on its own.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

I shall not respond to the point made by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen).

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

Because I am answering the speech of the person who has caught your eye, Mr. Morris, not interventions. My hon. Friend the Member for Chingford (Mr. Duncan-Smith) says that the European Court of Justice always moves forwards. What about the case that I quoted to him the last time that he made a rather distinguished speech to the Committee? The national insurance case moved exactly in the direction that he and I would wish to see.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

My right hon. Friend raises a case which was referred to on the last occasion, and on the occasion before that on which we debated the matter. I shall deal with that case in due course, if he will bear with me.

The danger is that, if one views the court at only a single point, it may appear no longer to be driven by the dictates of unification. However, if the Committee considers the progression of the court's judgments over time, all becomes clear. At times, the court appears to stop and consolidate its gains before the next advance, but advance it will. By so doing, it gives great power to the Community institutions.

The titanium dioxide case in 1991, in which the European Parliament supported the Commission versus the Council, was a clear example of how the court increases the powers of the Commission and the European Parliament at the expense of the nation states. In effect, when contention as to the basis of voting procedures arises, the qualified majority process is preferred to unanimous voting. That calls into question Ministers' assurances that qualified majority voting will be extended only to those areas to which we agree that it should.

I wish to show the Court's incremental revision. If we examine four cases taken from a period of more than 25 years, it becomes clear that the Court has progressively expanded the domain of Community law. It moves forward, then consolidates, only to move forward again.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

We are resuming a debate that we have had before. I have conceded that, in the early stages of the Community's development, the European Court of Justice took what I have referred to as several centripetal decisions. I think that I quoted to my hon. Friend in the Committee's last debate on these matters several cases in the past 12 months.

I do not claim that they represent a complete turnaround. Indeed, it is not for me to anticipate the decisions that the European Court of Justice might take any more than the decisions of the British courts. However, those cases began to move in the opposite direction to the one which my hon. Friend contends that the court always moves in. I should be grateful if the cases which my hon. Friend quoted to the House were moderately recent ones. We are all well aware of cases which took place 10 and 15 years ago.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

My right hon. Friend makes an interesting point. I have said, and I repeat, that I shall come to those cases. I am referring to a period of 25 years which brings us up to the present. I seek to show that the present is still involved as much as the past. I do not seek to avoid what my right hon. Friend asks me to do.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

The point that I am seeking to make to my hon. Friend is not that I dispute that decisions 10, 15 and 20 years ago have tended to be centripetal in their thrust, but that, in recent years, and particularly in the light of skilful negotiation by the Prime Minister at Maastricht on article 3b and so forth, a climate is now being created as a result of which a significant number of recent court judgments show sensitivity to the rights of member states which are both important and encouraging.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

If the Minister bears with me, I shall try to point out the reasons why I take a different view.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

Before the Minister of State gets carried away by his optimism, will my hon. Friend invite him to speak to the British fishermen who were absolutely appalled at the fairly recent case in which our merchant shipping legislation was torn apart by the court and Spanish fishermen had to be treated as British for national quota purposes? Does my hon. Friend notice that, whenever such a point is raised, the Minister of State always finds an excuse to talk to someone else? Is this not real stuff, affecting real people? Will the Minister stop being carried away by false optimism?

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford 4:30, 24 March 1993

As usual, my hon. Friend makes a powerful point which stands on its own: I cannot elaborate on it. He is absolutely right: these things affect real people and the judgments of the European Court have a major effect on individuals.

Photo of Mr Tony Marlow Mr Tony Marlow , Northampton North

So that my hon. Friend can make a decent spread, there are a few points that—

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

Order. The hon. Gentleman may make one short intervention.

Photo of Mr Tony Marlow Mr Tony Marlow , Northampton North

That was my intention, Mr. Morris, but other hon. Gentlemen have already raised points, and if those points are aggregated to the one that I am about to make, they become a few points.

Is it possible that my right hon. Friend the Minister of State is being a little naive? To a certain extent, do not Europe and the court work as a ratchet? My right hon. Friend said that the European courts have made favourable decisions in terms of nation states in the past 12 months, but during the past 12 months we have been considering the ratification of the treaty. Once the treaty is ratified, bingo—off they go again.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

My hon. Friend makes his point in his characteristic way. I am not sure about bingo, but I am pretty sure about the European Court of Justice. If my right hon. Friend the Minister will bear with me, I hope to cover these points.

I mentioned the historic Van Gend en Loos case previously. It was a landmark of Community law, because it was where the Court first enunciated that the treaties created a new legal order.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

What was the date of the case?

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

I shall provide the date in a moment. The case established that the treaties created a new legal order based on the principle that Community law produces direct effects and creates individual rights". The date of the case was 1963.

From this beginning, the court has taken progressively more expansive views of the principle of direct effect. In the van Duyn ruling of 1974, the court stated that individuals may invoke Community directives before national courts.

In its 1976 ruling, in the Defrenne case, the court applied the principle of direct effect to article 119 on sex equality. It found that the principle of equal pay for men and women laid down in the article was one of the Community's foundations and so had direct effect. It went on to say that national courts have a duty to ensure the protection of the rights which that provision vests in individuals". After the 1976 Defrenne ruling, the court paused, consolidating the gains made. Interestingly, in 1978, after Gabrielle Defrenne initiated yet another case, the court indicated that the interpretation of article 119 could not be expanded to the point that it would seem as prescribing equality in respect of all working conditions. Specifically, the court ruled that article 119 did not require identical retirement ages for men and women, even though this would result in differences in pension entitlement.

If an observer of the court had looked at the Defrenne ruling in 1978, he or she might have been tempted to say as my right hon. Friend said recently, that we are now in a new climate and that that centralising tendency is being arrested."—[Official Report, 27 January 1993; Vol. 217, c. 1061.] In doing so, the observer would be focusing too closely on the immediate circumstances and not on the court's long-term progression.

If we come forward 12 years to the Barber case of 1990, here the court has reversed the 1978 ruling. The court found in the Barber case that it is contrary to article 119 to impose an age condition which differs according to sex for the purpose of entitlement to a pension under a private occupational scheme, even if the difference between the pensionable age for men and that for women is based on the one provided for by the national statutory scheme. That was in 1990.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

Perhaps I can just finish this point.

In the 1978 decision, the court was simply holding its ground. It was in no way reversing itself. The court may pause for periods, but it does not retrace its steps, so there is a progression—slow, slow, quick, quick, slow.

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

It will not have escaped the notice of the Committee—I hasten to say that I do not use this to dismiss my hon. Friend's point—that, of the cases that my hon. Friend has quoted, one predates Britain's entry into the Community, two predate the Single European Act and one follows on from it. I am not using this to dismiss my hon. Friend's arguments, because I accept that the thrust of the court has been centripetal for a substantial period. But then my hon. Friend goes on, as the "killer" argument, as it were, to quote the Barber judgment, and again it will not have escaped the notice of the Committee that a protocol in the Maastricht treaty reverses that judgment.

That does two things. It emphasises that it is member states which sign the treaties and, in reversing the Barber judgment in the protocol, it gives us reason to believe—although I cannot anticipate decisions of the European Court—that it will have a significant influence on other judgments that we expect shortly in this area.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

My right hon. Friend raises a point to which I am just about to come, so if he will bear with me I will deal with it now.

The court can afford to take a long view, and will gradually expand the scope of Community law in just the way that it has in the Barber decision. It is impossible for anyone to deny that the Barber case is a significant advance in the reach of Community law. Consternation about its effects for the pension industry has been so acute that, as my right hon. Friend has pointed out, a specific protocol concerning article 119 had to be added to the Maastricht treaty to limit the industry's exposure to retroactive claims. This protocol is nothing more than a rearguard action, designed to contain the damage inflicted by the court's Barber ruling.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

I would like to make just a little progress before I give way again.

The example of incremental revision that I have just given is not an isolated instance of how the court will expand especially the Commission's powers at the expense of the nation states. Such progression in the court's rulings is an on-going phenomenon, since, in pursuit of its own agenda, the Commission regularly invites the court to revisit and reinterpret the treaty base and the large body of existing Community directives and regulations.

We are in the midst of one such example. As a result of a number of court interpretations of the directive on the transfer of undertakings, United Kingdom law was found by the Commission to be no longer compliant with the original directive. In 1981, when Parliament passed the Transfer of Undertakings (Protection of Employment) Regulations into law, in compliance with the original directive, Ministers did not anticipate how much more widely the scope of this directive would be interpreted.

The Commission's recent action taken against the United Kingdom shows how the Community institutions, working in tandem, can force us to adopt statutes against our will—like clause 62 of the Trade Union Reform and Employment Rights Bill.

Photo of Geoff Hoon Geoff Hoon , Ashfield

I do not want to tempt the hon. Member into misleading the Committee, but the transfer of undertakings directive was passed by a Labour Government, and was not properly translated into United Kingdom law in 1981 by a Conservative Government. That is really the difference. The British Government participated in the process of agreeing the directive, and it is that which the hon. Gentleman ought to concentrate on, rather than trying to wriggle out of the obligation created by the directive. In the way that he has presented it, he has given a very jaundiced view of the process.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

The hon. Gentleman, as usual, makes an important point. I was going to come on to that, because I was about to point out that it was initiated in 1977.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

Might I suggest to the hon. Gentleman that he should not give way so often but should get on with his arguments, as he would clearly anticipate most interventions?

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

I shall endeavour to follow your guidance, Mr. Morris.

That case is intriguing, because it demonstrates clearly how a policy initiated in 1977 is binding on subsequent Conservative Administrations, causing severe problems for Conservative Governments.

I was disappointed that my right hon. Friend the Minister of State mentioned the same three cases—which I said that I would deal with—that he produced on 27 January as an example of the European Court of Justice's new-found appreciation for the rights of nation states. Those cases do not support the thesis. At best, they demostrate the court marking time, and at worst incremental revision.

The case of the Commission v. Belgium—Wallonian sludge—was particularly obscure. At most, the ruling was ambiguous. The court was highly critical of the Wallonian decree and refrained from ruling against Belgium only because it found conflicting treaty objectives of environmental protection to support the decree. Belgium was no clear victor; it is important to note that each party had to bear its costs at the end of the case, which says more loudly than words what the court felt about it.

The Sunday trading case that the Minister mentioned is a perfect example of incremental revision expanding the court's powers. In the Stoke-on-Trent judgment, the court revised its previous Torfaen verdict that questions of proportionality should be left to the national courts, and ruled that the European Court had the power and the duty to rule on issues of proportionality—a form of incremental revision.

Photo of Bernard Jenkin Bernard Jenkin , Colchester North

The most important aspect of the Torfaen case is that it was strongly qualified by the words in the present state of Community law. That would seem to emphasise that the court sees the development of Community law as an on-going process from which competences are never returned to the member states.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

My hon. Friend has elaborated on my argument, and I am grateful.

In the Equal Opportunities Commission v. Secretary of State for Social Security

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

Before he leaves the subject of duty, will my hon. Friend ask the Minister of State, who is so optimistic of the court, to answer the question why, when the Government were presented with five infraction proceedings relating to the transfer of undertakings regulations, they caved in on four without taking them to the court? The only issue left is whether there is a registered trade union or merely workers' representatives.

If the Minister is so sure that things are going nicely on national interests, why did the Government cave in to four of the five Commission demands without putting up a fight? Perhaps he should get advice from the civil service, from the Government or from anyone else. If he is so confident, why did the Government cave in, as the demands were way ahead of the view of the acquired rights directive held by the Conservative Government in 1981, and the previous Labour Government in 1971?

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

As usual, my hon. Friend makes a powerful intervention.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

Why does the Minister not intervene?

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

Order. The hon. Gentleman is interrupting the speech of the hon. Member for Chingford (Mr. Duncan-Smith), and the Committee wishes to listen.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

Guided by you, Mr. Morris, I know that my right hon. Friend the Minister has heard that intervention clearly, and I leave it to his judgment to decide at which point he prefers to answer.

I feel that the case that I was discussing before the intervention was an example of the court marking time. It does not like derogations and never has. At best, it sees them as temporary and transitional means. However, that case followed closely on the Barber case, and just as the court was not willing to make that additional leap in the 1978 Defrenne ruling so soon after the significant advance made in the 1976 case, in the EOC-NICs case I believe that the court is biding its time before its next move in that area. Obviously, that is a personal view of the court's exact political involvement in and view of the Community. It is the same pattern—slow, slow, quick, quick, slow.

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There needs to be a positive effort to reform the court. Before we allow it to expand its competence in the way envisaged by the articles under consideration, we must have some controls on the European court and, as the court has clearly stated in Costa v. ENEL: The transfer by the States from their domestic legal system to the Community legal system of the rights and obligations arising under the Treaty carries with it a permanent limitation of their sovereign rights, against which a subsequent unilateral act incompatible with the concept of the Community cannot prevail. Obviously, my right hon. and learned Friend the Attorney-General appreciates that. I refer back to his comments on 22 February, when he pointed out the supremacy of Community law.

National rights will be jeopardised if the court continues to expand its competence unchecked, and if it is permitted to legislate by filling in the gaps left by the treaties and secondary Community legislation.

Maastricht only creates more gaps. A few weeks ago in the Committee, I tried to point out one such gap arising from Maastricht's new social provisions. Other hon. Members have indicated other ways, especially my hon. Friend the Member for Colchester, North (Mr. Jenkin) in his recent comments on subsidiarity.

In his comments on 27 January, my right hon. Friend the Minister of State said that the European Court of Justice was like the Supreme Court in the United States."—[Official Report, 27 January 1993; Vol. 217, c. 1057.] That is very interesting. Apart from wondering whether that is accepted by the Government—

Photo of Mr Tristan Garel-Jones Mr Tristan Garel-Jones , Watford

I think that I can anticipate my hon. Friend's argument. I made it clear that the Supreme Court in the United States is the supreme court of a single national federal state, which is not what the European Community is or will become. I was seeking to argue that the judgments of courts of that type are cyclical and are influenced by the society that surrounds them. My hon. Friend says that it is a case of quick, quick, slow but it will not have escaped his notice that those are the steps of the waltz, and that one can move forwards and backwards when dancing a waltz.

Photo of Iain Duncan Smith Iain Duncan Smith , Chingford

I am grateful to my right hon. Friend for clarifying his earlier statesments, but I shall not get involved in that dance as I was never very good in the ballroom.

We therefore require an institutional mechanism to alow us to review Community laws and regulations created by the European court in the manner that I have described.

A comparison has been made with the United States Supreme Court, but the European Court does not have similar constitutional checks and balances to temper its power. Article 55 of the French constitution is an example of such a mechanism. Unlike Britain—where, under the terms of article 3(2) of the European Communities Act 1972, Community law may be directly referred to in our courts—in France a judge may not directly invoke the primacy of Community law but must reason indirectly, via article 55, to dismiss statute law which conflicts with treaty obligations.

Article 55 is the sole channel for Community law in France, giving the French constitutional court the competence to carry out a direct review of Community law in cases where Community legislation can be fitted into the category of France's 'international commitments'". Such reviews analyse not the legitimacy of Community law, but its compatibility with domestic law.

Such a system for review is what Britain lacks and most definitely needs. In the short term, to ensure that we retain immediate control of our constitution, I propose that we should adopt the solutions set out by Martin Howe in a recent pamphlet called "Europe and the Constitution after Maastricht".

First, we ought to lay down procedures to be followed when conflicts between Community law and Acts of Parliament arise. Secondly, we must have an express list of protected matters, which no Community law should, under the law of the United Kingdom, be allowed to affect. Thirdly, we should be armed with reserve powers, exercisable by Order in Council, to render specific decisions or acts of the Community institutions of no effect in the United Kingdom in areas which are essential to our national interest and independence.

Those changes would help, but I seek a total reform of the European Court of Justice. In my maiden speech, I suggested that we needed a long-term solution, such as a constitutional court, which would be placed above the Community to take an impartial position on questions which affect the competence of nation states.

The opportunity to reform the court arose at Maastricht, but was not seized. Maastricht advances the power of the court, giving it room for interpretation in so many areas, not least in the social field and convergence criteria, with all the attendant costs.

Ministers' assurances carry little weight when the powers of the European Court are examined closely. How can we believe Ministers when they seek to reassure the House about the interpretation of articles 2 and 3 on social policy, and that we shall not be forced into the restrictive social practices undertaken by the other 11? It will be for the court, not for Ministers, to decide.

How can we accept the assurances of Ministers about our commitment to the second and third stages of the convergence criteria? Again, it will be the court, not they, that ultimately decides. How can we accept from Ministers reassurances about subsidiarity? As my hon. Friend the Member for Colchester, North pointed out, the court will define and make decisions on subsidiarity.

The European Court is now an immensely powerful institution, which I believe to be beyond the control of this or any other nation state. Far from concentrating on this fact at Maastricht and in subsequent debates, we have allowed ourselves to be sidetracked and have even enhanced the court's powers. As we have seen in case after case, ultimate judgment lies with the European Court of Justice, which will seek to hasten the march towards a central unitary European state. The court holds the greatest threat to those who wish to see Europe move in the opposite direction. Maastricht is simply an invitation to continue down the road to a unitary state.

Several hon. Members:

rose

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

I did not anticipate being called at this stage.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

If the hon. Gentleman does not wish to speak, he does not have to do so.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

In that case, the hon. Gentleman should get on with his speech.

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

I was merely explaining my unusual reluctance to participate in a debate.

The question that has been raised is whether we can trust the European Court. Whether one can trust a court depends upon whether one believes that it is free of political influences. We have just heard an extremely helpful, very learned, extremely well-researched and longish speech from my hon. Friend the Member for Chingford (Mr. Duncan-Smith). My hon. Friend re viewed the court's activities over a considerable period and confirmed our fear that what we have here is an example of what my noble Friend Lady Thatcher used to describe as the ratchet effect. The former Prime Minister did not for a moment pretend that the ratchet moved forward at the same pace all the time. This ratchet is very well maintained by an extremely large bureaucracy staffed by a very large number of extremely intelligent—and, incidentally, extremely well paid—people. That being the case, it was to be expected that it would be operated very intelligently. No doubt the same was said of the inquisition when it was doing its work.

Photo of Michael Spicer Michael Spicer Chair, Parliamentary Office of Science and Technology

Does my hon. Friend agree that the Maastricht treaty contains the French words "acquis communautaire", which describe the ratchet precisely?

Photo of Mr Nicholas Budgen Mr Nicholas Budgen , Wolverhampton South West

Of course that is true.

My hon. Friend the Member for Chingford is very helpful in the way in which he investigates the background of Community thought regarding the setting up of something that is half a supreme court and half an administrative court. However, he does not emphasise the essential difference between, on the one hand, the French idea of justice and the French idea of the supremacy of the power of the state and, on the other hand, our adversarial system, which is based on disputes between private individuals and, most of all, upon the extremely limited role given to the courts of this country.

For all their grandeur and for all their necessary importance, our courts and judges are but narrow technicians. They are not legislators. It is not their job to talk, for instance, about the moral or political climate. Their job is to look carefully and in detail at provisions and determine their effect on a particular dispute between individuals. Only in the French system are wider political considerations allowed to be brought into play.

I suggest that on this occasion the Government are best condemned from their own mouths. At the last sitting of this Committee my right hon. Friend the Minister of State made for the first time a point that he has made several times today. He said: Although it would be wrong and inappropriate for me to try to anticipate specific judgments, I believe that there is some evidence that the climate created by the Maastricht negotiations has brought about change."—[Official Report, 11 March 1993; Vol. 220, c. 1182.] That reference is to changes in the judgments of the European Court. This afternoon, my right hon. Friend said—I may be wrong about this, but I did make a note—that the judgments of the court had been influenced by the skilful negotiation of the Prime Minister at Maastricht.

Let us pause for a moment and decide what is the present status, in Community law, of the Maastricht negotiations. The treaty has not been ratified by all the countries of the Community. It is merely in a preliminary state. It is just as much in a preliminary state as, for instance, Conservative party conference discussions about the criminal law might be. One might even give the treaty a more elevated role by giving as an example the fact that the provisions of a Bill are not binding on the Law Lords before it has been passed by Parliament.

The Minister says that this is not a political court and that it is free of political interference, but he then has the impertinence to say that we have influenced it by our political activity. He says that this is a splendid, independent body, totally impervious to political activity, but that it is watching the political activities of the Prime Minister and doing what my right hon. Friend wants. By way of commendation of these proposals, my right hon. Friend says that this is a court influenced by mood. Our courts are not influenced by mood; they are bound by precedent and statute. They are bound by an extremely narrow interpretation of their duties; they are not bound by mood.

Let me present an argument about mood. There is no doubt that at the time of the Birmingham bombings there was in the country a mood that it would be right for certain persons to be convicted and even hanged—although there was no hanging—as quickly as possible. Would it have been right for the Court of Appeal to take the view that it should operate on the basis of the mood of the country, which was that the rules of evidence which protect suspected persons should be disregarded? At that time people would have been entirely in favour of allowing police officers to fabricate evidence, on the ground that the police knew perfectly well that these people had committed the offences, although, unfortunately, the necessary evidence was not available. But, of course, that is not what was done, because our courts are not bound by mood. Nor, indeed, are they influenced in any way by what politicians say.

Let me give another example. If it is right to say that this court should be influenced by what happened at Maastricht, what would be said were the Lord Chief Justice, dealing with the sentence for a rapist, to say that he had noted with interest and approval the exciting views of my hon. Friend the Member for Billericay (Mrs. Gorman), who has elegantly suggested that such people's goolies should be cut off?

The Lord Chief Justice says, "There is no legislation on the issue, but I am influenced by the political mood of the moment, so I shall order that their goolies be cut off." That is exactly the disgraceful argument that my right hon. Friend the Minister of State advances when he says that the court is not a political body, but it is being influenced by political views of which he approves.

There can be no trust in the institution. If, today, it is being influenced by the political views of the Prime Minister—views that are in no way encompassed by European legislation and in no way bound by European precedent—it is just as likely to be influenced by other forms of political pressure next week when those pressures will seem stronger. It is a political court to which we are giving extra power. We are allowing it to fine people. As my right hon. Friend the Minister of State said, we are allowing it to decide the fines in the light of the advice offered to it by a political body—the Commission. That is very dangerous.

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We must understand that our British tradition is to give a court extremely limited powers and leave the process of legislation to our sovereign Parliament. The answers given by my right hon. Friend the Minister of State when he so naively commended the way in which the court was now being influenced by political views of which he approved clearly showed that my right hon. Friend has condemned the court to be known by all the world as a political court, and a court that we cannot trust.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

The previous two speeches, which have been constitutional, not party political, in tone, have illustrated the extent to which the European Court of Justice is already superior in many ranges of legislation and statute to the high court of Parliament and even the House of Lords in its judicial function along the Corridor. Today we are being invited to discuss the further extension of those powers. I endorse some aspects of the speeches of the hon. Members for Wolverhampton, South-West (Mr. Budgen) and for Chingford (Mr. Duncan-Smith). The powers belong to a court that is different from the institution of which people in this country automatically think when confronted with the word "court".

The court will be a quasi—if not a full—constitutional court in terms of interpreting titles II, III and IV of the treaty of Rome. Therefore, in some respects, the court to which we are now voluntarily—and possibly irrevocably—sending our powers will be comparable to the Federal Court of the United States. As has been said, the European Court has political angles that do not apply to any of the courts in the United Kingdom.

The preambles of treaties should be taken into account when interpreting the wording of those treaties. Whereas, in this country, if case law is made through a judgment and we then find that it is unworkable—it may have been the right judgment for a specific case, but present complications in relation to another case—the Government can introduce a Bill. Hopefully, that Bill will not be politically contentious and the legislation can be set right, either in that parliamentary Session or the next one. That process will not be possible in future in relation to any matter over which the European Court of Justice has power.

The court's range of opinion is much greater than may at first appear. The hon. Member for Chingford cited some recent cases that are well known, including the Barber case and the Cassis de Dijon case. However, people may not be aware of the following aspects—although I think that some statistics appeared in Hansard not long ago. Where a matter of interpretation in the British domestic court—I use the phrase advisedly—falls within the sphere of Community law, magistrates, justices or their Lordships have to obtain an opinion from the European Court of Justice in Luxembourg. That fact is not always immediately visible. I do not know whether, when he replies, the Attorney-General will tell us whether it is made known at the time that a further opinion has to be taken, but I doubt whether it is, as I understand that the number of references is already sizeable and will grow. I understand that to be the position today.

The treaty contains further powers, some of which seem mild at present. Articles 126 and 127 on training and education come within the formal upgraded treaty of Rome, as does the issue of health in article 129. I know that article 129 involves co-operation in health matters to ensure that the resources for public health are dealt with effectively and efficiently. But no doubt at some stage an issue will arise where the interpretation of the articles on health and education will come before the European Court of Justice. We know about the famous subsidiarity. Such matters will not fall entirely within the powers of the treaty, which requires subsidiarity to be illuminated, but they will come within the powers of the court—or at least have the potential to do so.

I wish to refer to the powers of the court other than those that fall under titles II, III and IV. The Foreign Secretary and the Prime Minister have made great play of the fact that the power of the European Community will not be as centripetal as it has been. Time and time again they have said that we have stopped the expansion of centralist forces. They claim that we have rolled back those forces in that, whereas the treaty that the Dutch placed before the Community in 1991 had a complete institutional hold, we inserted into that—by our skilful talks at Maastricht—intergovernmental provisions out-side the power of the treaty. I think that the Foreign Secretary and the Prime Minister may have been over-optimistic, as there are more than 50 references to Community institutions inside the the so-called union pillars.

I shall concentrate on those references to the power of the court of justice in relation to home and judicial affairs. Those issues are mentioned in article K. The treaty also includes articles relating to institutions other than the European Court of Justice which deal with foreign and security matters. The title covering foreign and security issues contains no fewer than 22 references to Community institutions.

I wish to talk about further powers that the House of Commons may allow the European Court of Justice. Title VI, article K3.2.(c) sounds as though it is a small matter and indeed it is in small print. However, I am sure that the Attorney-General knows—he has made it clear in correspondence—that article K3.2.(c) gives power of adjudication to the European Court of Justice where a convention has been agreed between the member states. The convention can relate to any of the issues contained in article K.1 which deal with co-operation in the spheres of justice and home affairs.

I am well aware that the convention need not occur. The treaty contains the power to create the conventions, although they are not yet created.

Article K3.2(c) states: without prejudice to Article 220 of the Treaty establishing the European Community, draw up conventions which it shall recommend to Member States for adoption in accordance with their respective constitutional requirements.Unless otherwise provided by such conventions, measures implementing them shall be adopted within the Council by a majority of two-thirds of the High Contracting Parties. The "Council" means the Council of the Community, acting no doubt in its extended intergovernmental role. The article continues: Such conventions may stipulate that the Court of Justice shall have jurisdiction to interpret their provisions and to rule on any disputes regarding their application, in accordance with such arrangements as they may lay down. I understand, as I think the whole Committee understands, that before such a convention can be adopted it has to come back to this Parliament for approval under, as the treaty says, "respective constitutional requirements."

So far we have not had a full definition of what shall be the United Kingdom's constitutional requirements. Perhaps the Attorney-General will refer to that. That phrase appears three or four times in the treaty and it is fundamental. It will also apply to further amendments and there is no guarantee that the treaty will not be further amended before 1996. Who knows, there may be need for a further adjustment and the treaty may come back for further constitutional debate and agreement.

I hope that such a constitutional provision would be defined by an Act of Parliament. Would it be appropriate for a convention concerning home and judicial affairs related to the domestic arrangements of the United Kingdom to be dealt with other than by an Act of Parliament or a change to existing legislation, which would require a small Act of Parliament? What is the scope and probability of what the conventions would contain? They are listed in article K1.

One of the features of the reportage of these debates has been the feeling that we are going through the treaty line by line. To some extent we are doing that in so far as procedures allow, and there is a feeling that it is all terribly boring. It is said that people outside cannot understand the debate and that the Committee is following arcane procedures. I have a horrible feeling that in future when the European Court of Justice makes a ruling, as it did in relation to VAT on construction, people will say, "When did Parliament agree to that?"

The so-called Trevi arrangements clearly intend that there shall be conventions and those conventions will affect the matters set out in article K1, which talks about: 1. asylum policy;2. rules governing the crossing by persons of the external borders of the Member States and the exercise of controls thereon;". One cannot get much more basic than that about border control. 3. immigration policy and policy regarding nationals of third countries; I shall not quote the subsections, but they relate to conditions of entry, conditions of residence and the combating of unauthorised immigration. 4. combating drug addiction in so far as this is not covered by 7 to 9;5. combating fraud on an international scale in so far as it is not covered by 7 to 9;6. judicial co-operation in civil matters;8. customs co-operation;9. police co-operation for the purposes of preventing and combating terrorism, unlawful drug trafficking and other serious forms of international crime, including if necessary certain aspects of customs co-operation, in connection with the organisation of a Union-wide system for exchanging information within a European Police Office (Europol). I have read those into the record because it is unlikely that United Kingdom citizens are fully aware of some of the treaty's contents. I am worried that this title is presently excluded from the Bill. However, the powers of the European Court of Justice are not. As we know, that court is one of the foundation and fundamental institutions of the European Community and, according to the Foreign Secretary and the Prime Minister, it is the inner trunk that is supported by the outer pillars. One of the outer pillars, title VI, has the European Court of Justice.

5.15 pm

I have written to the Foreign Secretary about the matter and he kindly wrote to me on 17 March. His letter clarifies the matter, but is rather surprising. I asked him about article K3.2(c) being outside the institutions of the Community and suggested that his claims and that of the Prime Minister about the supports of the edifice were a little exaggerated.

Photo of Mr Andrew Rowe Mr Andrew Rowe , Kent Mid

I am listening with great attention to the hon. Gentleman. He gives the impression that, if the general public understood that some international issues were included in one form or another in the treaty, they would instantly repudiate it. Surely the reverse is the truth. Just as the international law of the sea is justiciable in an international court, a whole range of international problems that are growing in intensity require international treatment. Many of my constituents would be exceedingly relieved if problems such as international terrorism could be dealt with in that way.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I am grateful to the hon. Gentleman for intervening on that issue. His intervention illustrates the theme of the arguments of many hon. Members, that the real content of the treaty of European union—which is the correct title of the treaty—is not as well known as it should be. It is not, and the Government, despite issuing a few publications, do not want it to be better known.

The Minister of State, Foreign and Commonwealth Office enters the Committee at just the right moment. He knows that I and my hon. Friends, including my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore), and some Conservative Members support a private Member's Bill called the European Union (Public Information) Bill. It sets out a statutory procedure, which may get more publicity later, by which hon. Members will know what is in the Bill that is before the Committee.

I shall not stray too far from the subject of the debate, but one of the matters contained in our Bill, if the Government allow it to got through—they have objected to it on 15 or 16 Fridays—

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

Order. Perhaps the hon. Gentleman was not clear about what I said earlier. The matter that he is discussing is out of order. Perhaps he will return to discussing the European Court of Justice about which he was making an interesting contribution.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I was questioned by the hon. Member For Mid-Kent (Mr. Rowe) and—

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

Order. The hon. Gentleman is an experienced member of the Committee and should not be tempted to go down that route.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I shall return to the correspondence from the Home Secretary.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

Before the constituents of my hon. Friend the Member for Mid-Kent (Mr. Rowe) get too excited and optimistic about this great new opportunity, would the hon. Member for Newham (Mr. Spearing) remind him and the Committee that under article L, which we are discussing, a common foreign and security policy and justice and home affairs are excluded from the jurisdiction of the court?

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Some of those matters might have been cleared up if the Government had not taken the action that they did.

Photo of Mr Andrew Rowe Mr Andrew Rowe , Kent Mid

On a point of order, Mr. Morris. I would not want it recorded that I was tempting the hon. Member for Newham, South (Mr. Spearing) down the route that he chose when he answered my question, because my question was rather different.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

That is firmly on the record and clearly the hon. Member for Newham, South (Mr. Spearing) did not hear the hon. Gentleman's intervention with sufficient clarity. Either way, perhaps we may return to the subject of the European Court of Justice.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

In his letter to me dated 17 March, the Minister of State wrote: As for the potential role of the European Court of Justice under Article K.3(2)(c), you misunderstood the jurisdiction the Court might be given. It would not be the jurisdiction it now has under EEC treaties, nor would its rulings be binding in Community law. It would be ad hoc jurisdiction, conferred and regulated by a member state convention outside the EC framework to interpret that convention and to settle disputes on it. This is exactly the present position on the convention on mutual recognition and enforcements of judgments among the member states agreed in 1968 pursuant to article 220 of the Treaty of Rome. The European Court of Justice rulings on the 1968 convention are given force in UK law not by the European Communities Act but by the 1982 Civil Jurisdiction Act. That may be news to some of us. I have no doubt that the lawyers among us, including my right hon. Friend the Member for Llanelli (Mr. Davies), may be familiar with that matter.

It is interesting to learn that the European Court of Justice has vires and power in the United Kingdom by Acts of Parliament other than the European Communities Act 1972 and other matters relating directly to it.

That information may be important. No doubt the Attorney-General will confirm when he replies that that which is written into the home affairs article that I just quoted and the power of the European Court of Justice is given dual authenticity by the treaty itself—which is not particularly the concern of the House—by direct legislation and another Act of Parliament.

I put down a marker now because if such a convention comes before the House in due course—which I hope will require another Act—we should have a full explanation, because we would then be putting ourselves under direct European Court jurisdiction on important matters that are claimed to be intergovernmental. Those matters, and others to which the hon. Member for Mid-Kent (Mr. Rowe) referred, are best dealt with in that way, rather than within the rigidities of the European Community as originally established, its central institutions, or the Act of European union that is now being debated.

Photo of Mr Timothy Kirkhope Mr Timothy Kirkhope The Lord Commissioner of HM Treasury

rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The Committee divided: Ayes 278, Noes 221.

Division No. 201][5.23 pm
AYES
Adley, RobertEvennett, David
Ainsworth, Peter (East Surrey)Faber, David
Aitken, JonathanFabricant, Michael
Alexander, RichardFairbairn, Sir Nicholas
Allason, Rupert (Torbay)Fenner, Dame Peggy
Amess, DavidField, Barry (Isle of Wight)
Ancram, MichaelForman, Nigel
Arbuthnot, JamesForsyth, Michael (Stirling)
Arnold, Jacques (Gravesham)Forth, Eric
Arnold, Sir Thomas (Hazel Grv)Foster, Don (Bath)
Ashby, DavidFowler, Rt Hon Sir Norman
Ashdown, Rt Hon PaddyFox, Dr Liam (Woodspring)
Atkinson, Peter (Hexham)Freeman, Roger
Baker, Nicholas (Dorset North)Gale, Roger
Baldry, TonyGallie, Phil
Banks, Matthew (Southport)Garel-Jones, Rt Hon Tristan
Banks, Robert (Harrogate)Garnier, Edward
Bates, MichaelGillan, Cheryl
Batiste, SpencerGoodlad, Rt Hon Alastair
Bellingham, HenryGoodson-Wickes, Dr Charles
Beresford, Sir PaulGrant, Sir Anthony (Cambs SW)
Blackburn, Dr John G.Greenway, Harry (Ealing N)
Booth, HartleyGreenway, John (Ryedale)
Boswell, TimGriffiths, Peter (Portsmouth, N)
Bottomley, Peter (Eltham)Grylls, Sir Michael
Bottomley, Rt Hon VirginiaGummer, Rt Hon John Selwyn
Bowden, AndrewHague, William
Bowis, JohnHamilton, Rt Hon Archie (Epsom)
Brandreth, GylesHamilton, Neil (Tatton)
Brazier, JulianHampson, Dr Keith
Bright, GrahamHanley, Jeremy
Brooke, Rt Hon PeterHannam, Sir John
Brown, M. (Brigg & Cl'thorpes)Hargreaves, Andrew
Browning, Mrs. AngelaHarris, David
Bruce, Ian (S Dorset)Haselhurst, Alan
Bruce, Malcolm (Gordon)Hawkins, Nick
Burns, SimonHayes, Jerry
Burt, AlistairHeald, Oliver
Butterfill, JohnHeath, Rt Hon Sir Edward
Carlile, Alexander (Montgomry)Heathcoat-Amory, David
Carlisle, Kenneth (Lincoln)Hendry, Charles
Carrington, MatthewHeseltine, Rt Hon Michael
Channon, Rt Hon PaulHicks, Robert
Chapman, SydneyHiggins, Rt Hon Sir Terence L.
Churchill, MrHill, James (Southampton Test)
Clark, Dr Michael (Rochford)Hogg, Rt Hon Douglas (G'tham)
Clarke, Rt Hon Kenneth (Ruclif)Horam, John
Clifton-Brown, GeoffreyHordern, Rt Hon Sir Peter
Coe, SebastianHoward, Rt Hon Michael
Colvin, MichaelHowarth, Alan (Strat'rd-on-A)
Congdon, DavidHowell, Rt Hon David (G'dford)
Conway, DerekHughes Robert G. (Harrow W)
Coombs, Anthony (Wyre For'st)Hunt, Rt Hon David (Wirral W)
Coombs, Simon (Swindon)Hunt, Sir John (Ravensbourne)
Cope, Rt Hon Sir JohnHunter, Andrew
Cormack, PatrickJack, Michael
Couchman, JamesJackson, Robert (Wantage)
Currie, Mrs Edwina (S D'by'ire)Johnson Smith, Sir Geoffrey
Curry, David (Skipton & Ripon)Johnston, Sir Russell
Dafis, CynogJones, Gwilym (Cardiff N)
Davis, David (Boothferry)Jones, Ieuan Wyn (Ynys Môn)
Day, StephenJopling, Rt Hon Michael
Deva, Nirj JosephKellett-Bowman, Dame Elaine
Dickens, GeoffreyKennedy, Charles (Ross,C&S)
Dorrell, StephenKey, Robert
Douglas-Hamilton, Lord JamesKilfedder, Sir James
Dover, DenKing, Rt Hon Tom
Duncan, AlanKirkhope, Timothy
Dunn, BobKirkwood, Archy
Durant, Sir AnthonyKnight, Mrs Angela (Erewash)
Dykes, HughKnight, Greg (Derby N)
Eggar, TimKnight, Dame Jill (Bir'm E'st'n)
Elletson, HaroldKnox, David
Emery, Rt Hon Sir PeterKynoch, George (Kincardine)
Evans, David (Welwyn Hatfield)Lait, Mrs Jacqui
Evans, Jonathan (Brecon)Lamont, Rt Hon Norman
Evans, Roger (Monmouth)Lang, Rt Hon Ian
Leigh, EdwardRowe, Andrew (Mid Kent)
Lennox-Boyd, MarkRumbold, Rt Hon Dame Angela
Lester, Jim (Broxtowe)Ryder, Rt Hon Richard
Lidington, DavidSackville, Tom
Lilley, Rt Hon PeterSainsbury, Rt Hon Tim
Lloyd, Peter (Fareham)Scott, Rt Hon Nicholas
Llwyd, ElfynShaw, David (Dover)
Luff, PeterShaw, Sir Giles (Pudsey)
Lyell, Rt Hon Sir NicholasShephard, Rt Hon Gillian
Lynne, Ms LizShepherd, Colin (Hereford)
MacGregor, Rt Hon JohnShersby, Michael
MacKay, AndrewSoames, Nicholas
Maclean, DavidSpencer, Sir Derek
Maclennan, RobertSpicer, Sir James (W Dorset)
McLoughlin, PatrickSpink, Dr Robert
Madel, DavidSpring, Richard
Maitland, Lady OlgaSproat, Iain
Major, Rt Hon JohnSquire, Robin (Hornchurch)
Malone, GeraldStanley, Rt Hon Sir John
Mans, KeithSteel, Rt Hon Sir David
Marland, PaulSteen, Anthony
Marshall, John (Hendon S)Stephen, Michael
Marshall, Sir Michael (Arundel)Stern, Michael
Martin, David (Portsmouth S)Stewart, Allan
Mawhinney, Dr BrianStreeter, Gary
Mayhew, Rt Hon Sir PatrickSumberg, David
Mellor, Rt Hon DavidSykes, John
Merchant, PiersTaylor, Ian (Esher)
Michie, Mrs Ray (Argyll Bute)Taylor, John M. (Solihull)
Milligan, StephenTemple-Morris, Peter
Mills, IainThomason, Roy
Mitchell, Andrew (Gedling)Thompson, Sir Donald (C'er V)
Mitchell, Sir David (Hants NW)Thompson, Patrick (Norwich N)
Monro, Sir HectorThornton, Sir Malcolm
Montgomery, Sir FergusThurnham, Peter
Moss, MalcolmTownsend, Cyril D. (Bexl'yh'th)
Needham, RichardTracey, Richard
Nelson, AnthonyTredinnick, David
Neubert, Sir MichaelTwinn, Dr Ian
Newton, Rt Hon TonyTyler, Paul
Nicholls, PatrickVaughan, Sir Gerard
Nicholson, David (Taunton)Viggers, Peter
Nicholson, Emma (Devon West)Waldegrave, Rt Hon William
Norris, SteveWalden, George
Onslow, Rt Hon Sir CranleyWallace, James
Oppenheim, PhillipWaller, Gary
Ottaway, RichardWaterson, Nigel
Page, RichardWatts, John
Paice, JamesWells, Bowen
Patten, Rt Hon JohnWheeler, Rt Hon Sir John
Peacock, Mrs ElizabethWhitney, Ray
Pickles, EricWhittingdale, John
Porter, Barry (Wirral S)Widdecombe, Ann
Portillo, Rt Hon MichaelWiggin, Sir Jerry
Powell, William (Corby)Wigley, Dafydd
Rathbone, TimWilletts, David
Redwood, JohnWolfson, Mark
Renton, Rt Hon TimWood, Timothy
Richards, RodYeo, Tim
Riddick, GrahamYoung, Sir George (Acton)
Robathan, Andrew
Roberts, Rt Hon Sir WynTellers for the Ayes:
Robertson, Raymond (Ab'd'n S)Mr. David Lightbown and
Robinson, Mark (Somerton)Mr. Irvine Patnick.
NOES
Abbott, Ms DianeBell, Stuart
Adams, Mrs IreneBenn, Rt Hon Tony
Ainger, NickBennett, Andrew F.
Ainsworth, Robert (Cov'try NE)Benton, Joe
Allason, Rupert (Torbay)Bermingham, Gerald
Anderson, Donald (Swansea E)Berry, Dr. Roger
Anderson, Ms Janet (Ros'dale)Betts, Clive
Armstrong, HilaryBlair, Tony
Banks, Tony (Newham NW)Blunkett, David
Barnes, HarryBoyce, Jimmy
Barron, KevinBoyes, Roland
Battle, JohnBradley, Keith
Beckett, Rt Hon MargaretBray, Dr Jeremy
Beggs, RoyBrown, Gordon (Dunfermline E)
Brown, N. (N'c'tle upon Tyne E)Illsley, Eric
Burden, RichardIngram, Adam
Byers, StephenJackson, Glenda (H'stead)
Caborn, RichardJackson, Helen (Shef'ld, H)
Callaghan, JimJamieson, David
Campbell, Mrs Anne (C'bridge)Janner, Greville
Campbell-Savours, D. N.Jones, Jon Owen (Cardiff C)
Canavan, DennisJones, Lynne (B'ham S O)
Cann, JamieJones, Martyn (Clwyd, SW)
Chisholm, MalcolmKaufman, Rt Hon Gerald
Clapham, MichaelKeen, Alan
Clark, Dr David (South Shields)Kennedy, Jane (Lpool Brdgn)
Clarke, Eric (Midlothian)Khabra, Piara S.
Clarke, Tom (Monklands W)Kilfoyle, Peter
Clelland, DavidKinnock, Rt Hon Neil (Islwyn)
Clwyd, Mrs AnnLeighton, Ron
Cohen, HarryLitherland, Robert
Connarty, MichaelLivingstone, Ken
Cook, Frank (Stockton N)Lloyd, Tony (Stretford)
Cook, Robin (Livingston)Loyden, Eddie
Corbett, RobinMcAllion, John
Corbyn, JeremyMcAvoy, Thomas
Corston, Ms JeanMcCartney, Ian
Cousins, JimMcCrea, Rev William
Cryer, BobMacdonald, Calum
Cummings, JohnMcKelvey, William
Cunliffe, LawrenceMackinlay, Andrew
Cunningham, Jim (Covy SE)McMaster, Gordon
Cunningham, Rt Hon Dr JohnMcNamara, Kevin
Darling, AlistairMcWilliam, John
Davies, Bryan (Oldham C'tral)Madden, Max
Davies, Rt Hon Denzil (Llanelli)Maginnis, Ken
Davies, Ron (Caerphilly)Mahon, Alice
Davis, Terry (B'ham, H'dge H'l)Mandelson, Peter
Denham, JohnMarek, Dr John
Dewar, DonaldMarshall, David (Shettleston)
Dixon, DonMarshall, Jim (Leicester, S)
Dobson, FrankMartlew, Eric
Donohoe, Brian H.Maxton, John
Dowd, JimMeacher, Michael
Dunwoody, Mrs GwynethMichael, Alun
Eagle, Ms AngelaMichie, Bill (Sheffield Heeley)
Eastham, KenMilburn, Alan
Evans, John (St Helens N)Miller, Andrew
Fatchett, DerekMitchell, Austin (Gt Grimsby)
Field, Frank (Birkenhead)Moonie, Dr Lewis
Fisher, MarkMorgan, Rhodri
Flynn, PaulMorley, Elliot
Foster, Rt Hon DerekMorris, Rt Hon A. (Wy'nshawe)
Foulkes, GeorgeMorris, Estelle (B'ham Yardley)
Fraser, JohnMorris, Rt Hon J. (Aberavon)
Fyfe, MariaMowlam, Marjorie
Gapes, MikeMullin, Chris
Garrett, JohnOakes, Rt Hon Gordon
Gerrard, NeilO'Brien, Michael (N W'kshire)
Godman, Dr Norman A.O'Brien, William (Normanton)
Godsiff, RogerO'Hara, Edward
Golding, Mrs LlinOlner, William
Gordon, MildredOrme, Rt Hon Stanley
Grant, Bernie (Tottenham)Parry, Robert
Griffiths, Nigel (Edinburgh S)Pendry, Tom
Griffiths, Win (Bridgend)Pickthall, Colin
Gunnell, JohnPike, Peter L.
Hain, PeterPope, Greg
Hanson, DavidPowell, Ray (Ogmore)
Harvey, NickPrentice, Ms Bridget (Lew'm E)
Hattersley, Rt Hon RoyPrentice, Gordon (Pendle)
Henderson, DougPrescott, John
Heppell, JohnPrimarolo, Dawn
Hill, Keith (Streatham)Purchase, Ken
Hinchliffe, DavidQuin, Ms Joyce
Hoey, KateRaynsford, Nick
Hogg, Norman (Cumbernauld)Reid, Dr John
Hoon, GeoffreyRobertson, George (Hamilton)
Howarth, George (Knowsley N)Robinson, Peter (Belfast E)
Howells, Dr. Kim (Pontypridd)Roche, Mrs. Barbara
Hughes, Kevin (Doncaster N)Rogers, Allan
Hughes, Robert (Aberdeen N)Rooney, Terry
Hughes, Roy (Newport E)Ross, Ernie (Dundee W)
Hutton, JohnRowlands, Ted
Ruddock, JoanTaylor, Mrs Ann (Dewsbury)
Sheerman, BarryTrimble, David
Sheldon, Rt Hon RobertWalker, Rt Hon Sir Harold
Shore, Rt Hon PeterWalley, Joan
Short, ClareWardell, Gareth (Gower)
Simpson, AlanWareing, Robert N
Skinner, DennisWatson, Mike
Smith, Andrew (Oxford E)Wicks, Malcolm
Smith, C. (Isl'ton S & F'sbury)Williams, Rt Hon Alan (Sw'n W)
Smith, Rt Hon John (M'kl'ds E)Williams, Alan W (Carmarthen)
Smith, Llew (Blaenau Gwent)Wilson, Brian
Snape, PeterWinnick, David
Soley, CliveWorthington, Tony
Spearing, NigelWright, Dr Tony
Steinberg, Gerry
Stevenson, GeorgeTellers for the Noes:
Stott, RogerMr. Alan Meale and
Strang, Dr. GavinMr. Dennis Turner.
Straw, Jack

Question accordingly agreed to.

Question put accordingly, That the amendment be made:—

The Committee divided: Ayes 56, Noes 279.

Division No. 202][5.35 pm
AYES
Adams, Mrs IreneLoyden, Eddie
Allason, Rupert (Torbay)McAllion, John
Barnes, HarryMcAvoy, Thomas
Benn, Rt Hon TonyMcCrea, Rev William
Bennett, Andrew F.Madden, Max
Callaghan, JimMahon, Alice
Canavan, DennisMarshall, David (Shettleston)
Cann, JamieMarshall, Jim (Leicester, S)
Chisholm, MalcolmMichie, Bill (Sheffield Healey)
Connarty, MichaelMitchell, Austin (Gt Grimsby)
Corbyn, JeremyOlner, William
Cummings, JohnParry, Robert
Davies, Rt Hon Denzil (Llanelli)Pickthall, Colin
Davis, Terry (B'ham, H'dge H'l)Purchase, Ken
Dunwoody, Mrs GwynethRobinson, Peter (Belfast E)
Etherington, BillRowlands, Ted
Field, Frank (Birkenhead)Shore, Rt Hon Peter
Gerrard, NeilSimpson, Alan
Godman, Dr Norman A.Smith, Llew (Blaenau Gwent)
Gordon, MildredSnape, Peter
Hanson, DavidSpearing, Nigel
Harvey, NickSteinberg, Gerry
Hinchliffe, DavidTaylor, Sir Teddy (Southend, E)
Howarth, George (Knowsley N)Trimble, David
Hughes, Roy (Newport E)Vaz, Keith
Jones, Martyn (Clwyd, SW)Winnick, David
Kinnock, Rt Hon Neil (Islwyn)
Leighton, RonTellers for the Ayes:
Litherland, RobertMr. Bob Cryer and
Livingstone, KenMr. Dennis Skinner.
NOES
Adley, RobertBooth, Hartley
Ainsworth, Peter (East Surrey)Boswell, Tim
Aitken, JonathanBottomley, Peter (Eltham)
Alexander, RichardBottomley, Rt Hon Virginia
Allason, Rupert (Torbay)Bowden, Andrew
Amess, DavidBowis, John
Ancram, MichaelBrandreth, Gyles
Arbuthnot, JamesBrazier, Julian
Arnold, Jacques (Gravesham)Bright, Graham
Arnold, Sir Thomas (Hazel Grv)Brooke, Rt Hon Peter
Ashby, DavidBrown, M. (Brigg & Cl'thorpes)
Ashdown, Rt Hon PaddyBrowning, Mrs. Angela
Atkinson, Peter (Hexham)Bruce, Ian (S Dorset)
Baldry, TonyBruce, Malcolm (Gordon)
Banks, Matthew (Southport)Burns, Simon
Banks, Robert (Harrogate)Burt, Alistair
Bates, MichaelButterfill, John
Batiste, SpencerCarlile, Alexander (Montgomry)
Bellingham, HenryCarlisle, Kenneth (Lincoln)
Beresford, Sir PaulCarrington, Matthew
Blackburn, Dr John G.Channon, Rt Hon Paul
Chapman, SydneyHordern, Rt Hon Sir Peter
Churchill, MrHoward, Rt Hon Michael
Clarke, Rt Hon Kenneth (Ruclif)Howarth, Alan (Strat'rd-on-A)
Clifton-Brown, GeoffreyHowell, Rt Hon David (G'dford)
Coe, SebastianHughes Robert G. (Harrow W)
Colvin, MichaelHunt, Rt Hon David (Wirral W)
Congdon, DavidHunt, Sir John (Ravensbourne)
Conway, DerekHunter, Andrew
Coombs, Anthony (Wyre For'st)Jack, Michael
Coombs, Simon (Swindon)Jackson, Robert (Wantage)
Cope, Rt Hon Sir JohnJohnson Smith, Sir Geoffrey
Cormack, PatrickJohnston, Sir Russell
Couchman, JamesJones, Gwilym (Cardiff N)
Currie, Mrs Edwina (S D'by'ire)Jones, Ieuan Wyn (Ynys Môn)
Curry, David (Skipton & Ripon)Jopling, Rt Hon Michael
Dafis, CynogKellett-Bowman, Dame Elaine
Davis, David (Boothferry)Kennedy, Charles (Ross,C&S)
Day, StephenKey, Robert
Devlin, TimKilfedder, Sir James
Dickens, GeoffreyKing, Rt Hon Tom
Dorrell, StephenKirkhope, Timothy
Douglas-Hamilton, Lord JamesKirkwood, Archy
Dover, DenKnight, Mrs Angela (Erewash)
Duncan, AlanKnight, Greg (Derby N)
Dunn, BobKnight, Dame Jill (Bir'm E'st'n)
Durant, Sir AnthonyKnox, David
Dykes, HughKynoch, George (Kincardine)
Eggar, TimLait, Mrs Jacqui
Elletson, HaroldLamont, Rt Hon Norman
Emery, Rt Hon Sir PeterLang, Rt Hon Ian
Evans, David (Welwyn Hatfield)Leigh, Edward
Evans, Jonathan (Brecon)Lennox-Boyd, Mark
Evans, Roger (Monmouth)Lester, Jim (Broxtowe)
Evennett, DavidLidington, David
Faber, DavidLightbown, David
Fabricant, MichaelLilley, Rt Hon Peter
Fairbairn, Sir NicholasLloyd, Peter (Fareham)
Fenner, Dame PeggyLlwyd, Elfyn
Field, Barry (Isle of Wight)Luff, Peter
Forman, NigelLyell, Rt Hon Sir Nicholas
Forsyth, Michael (Stirling)Lynne, Ms Liz
Forth, EricMacGregor, Rt Hon John
Foster, Don (Bath)Maclean, David
Fowler, Rt Hon Sir NormanMaclennan, Robert
Fox, Dr Liam (Woodspring)McLoughlin, Patrick
Freeman, RogerMadel, David
Gale, RogerMaitland, Lady Olga
Gallie, PhilMajor, Rt Hon John
Garel-Jones, Rt Hon TristanMalone, Gerald
Garnier, EdwardMans, Keith
Gillan, CherylMarland, Paul
Goodlad, Rt Hon AlastairMarshall, John (Hendon S)
Goodson-Wickes, Dr CharlesMarshall, Sir Michael (Arundel)
Gorst, JohnMartin, David (Portsmouth S)
Grant, Sir Anthony (Cambs SW)Mawhinney, Dr Brian
Greenway, Harry (Ealing N)Mayhew, Rt Hon Sir Patrick
Greenway, John (Ryedale)Mellor, Rt Hon David
Grylls, Sir MichaelMerchant, Piers
Gummer, Rt Hon John SelwynMichie, Mrs Ray (Argyll Bute)
Hague, WilliamMilligan, Stephen
Hamilton, Rt Hon Archie (Epsom)Mills, Iain
Hamilton, Neil (Tatton)Mitchell, Andrew (Gedling)
Hampson, Dr KeithMitchell, Sir David (Hants NW)
Hanley, JeremyMonro, Sir Hector
Hannam, Sir JohnMontgomery, Sir Fergus
Hargreaves, AndrewMoss, Malcolm
Harris, DavidNeedham, Richard
Haselhurst, AlanNelson, Anthony
Hawkins, NickNeubert, Sir Michael
Hayes, JerryNewton, Rt Hon Tony
Heald, OliverNicholls, Patrick
Heath, Rt Hon Sir EdwardNicholson, David (Taunton)
Heathcoat-Amory, DavidNicholson, Emma (Devon West)
Hendry, CharlesNorris, Steve
Heseltine, Rt Hon MichaelOnslow, Rt Hon Sir Cranley
Hicks, RobertOppenheim, Phillip
Higgins, Rt Hon Sir Terence L.Ottaway, Richard
Hill, James (Southampton Test)Page, Richard
Hogg, Rt Hon Douglas (G'tham)Paice, James
Horam, JohnPatnick, Irvine
Patten, Rt Hon JohnSumberg, David
Pawsey, JamesSykes, John
Peacock, Mrs ElizabethTaylor, Ian (Esher)
Pickles, EricTaylor, John M. (Solihull)
Porter, Barry (Wirral S)Taylor, Matthew (Truro)
Portillo, Rt Hon MichaelTemple-Morris, Peter
Powell, William (Corby)Thomason, Roy
Rathbone, TimThompson, Sir Donald (C'er V)
Redwood, JohnThompson, Patrick (Norwich N)
Renton, Rt Hon TimThornton, Sir Malcolm
Richards, RodThurnham, Peter
Riddick, GrahamTownsend, Cyril D. (Bexl'yh'th)
Robathan, AndrewTracey, Richard
Roberts, Rt Hon Sir WynTredinnick, David
Robertson, Raymond (Ab'd'n S)Twinn, Dr Ian
Robinson, Mark (Somerton)Tyler, Paul
Rowe, Andrew (Mid Kent)Vaughan, Sir Gerard
Rumbold, Rt Hon Dame AngelaViggers, Peter
Ryder, Rt Hon RichardWaldegrave, Rt Hon William
Sackville, TomWalden, George
Sainsbury, Rt Hon TimWallace, James
Scott, Rt Hon NicholasWaller, Gary
Shaw, David (Dover)Wardle, Charles (Bexhill)
Shaw, Sir Giles (Pudsey)Waterson, Nigel
Shephard, Rt Hon GillianWatts, John
Shepherd, Colin (Hereford)Wells, Bowen
Shersby, MichaelWheeler, Rt Hon Sir John
Soames, NicholasWhitney, Ray
Spencer, Sir DerekWiddecombe, Ann
Spicer, Sir James (W Dorset)Wiggin, Sir Jerry
Spink, Dr RobertWigley, Dafydd
Spring, RichardWilletts, David
Sproat, IainWolfson, Mark
Squire, Robin (Hornchurch)Wood, Timothy
Stanley, Rt Hon Sir JohnYeo, Tim
Steel, Rt Hon Sir DavidYoung, Sir George (Acton)
Steen, Anthony
Stephen, MichaelTellers for the Noes:
Stern, MichaelMr. Nicholas Baker and
Stewart, AllanMr. Andrew MacKay.
Streeter, Gary

Question accordingly negatived.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil and Rhymney

On a point of order, Mr. Morris. I seek your guidance. We are about to embark on a debate of a group of nearly 50 amendments. You and the hon. Members who have been present during the Committee stage will remember that there was considerable confusion about the character and nature of amendment No. 27. In a statement, the Foreign Secretary said: In summary, the Law Officers consider that, while incorporation of the protocol in domestic law is desirable, it is not necessary for ratification or implementation of the Maastricht treaty."—[Official Report, 15 February 1993; Vol. 219, c. 27.] We desperately need your advice, Mr. Morris, or possibly that of a Minister through you, as to which of the 50 amendments, which cover a number of protocols and articles, fall into the "desirable" category and which fall into the "necessary" category for ratification. Otherwise, we shall not know the level of seriousness that we are to give to each amendment. The Committee was caught completely by surprise when it found that amendment No. 27 was desirable but not necessary for ratification. May we have some advice and information as to which amendment falls into which category?

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

First, that is not a matter for the Chair. Secondly, we have not started yet, so no one can rule on anything until the procedure is under way.

Without further ado, we shall consider the European system of central banks and national banking arrangements. We lead with amendment No. 36, with which we shall consider the others listed on the selection paper. I call Mr. Andrew Smith.

Photo of Peter Hain Peter Hain , Neath

On a point of order, Mr. Morris.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

I hope that this is a new point of order and not the same one that we have just had.

Photo of Peter Hain Peter Hain , Neath

It is, Mr. Morris. I wonder whether—[Interruption.] It certainly is a new point of order. I wonder whether, with your indulgence, Mr. Morris, the Attorney-General could give a ruling on whether amendment No. 36, if carried, would actually —

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

Order. The hon. Gentleman is anticipating. The amendment has not even been moved yet.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

I beg to move amendment No. 36, in page 1, line 9, after 'II', insert '(except Article 107 on page 22 of Cm 1934)'.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

With this, it will be convenient also to discuss the following: Amendment No. 84, in page 1, line 9, after 'II', insert '(with the exception of those Articles and Protocols set out in Schedule [Monetary Policy and the establishment of the European System of Central Banks]).'. Amendment No. 86, in page 1, line 9, after 'II', insert '(other than Article 108a)'. Amendment No. 87, in page 1, line 9, after 'II', insert '(other than Article 108)'. Amendment No. 101, in page 1, line 9, after 'II', insert '(except Article 106 on page 22 of Cm 1934 which relates to the European Central Bank)'. Amendment No. 197, in page 1, line 9, after 'II', insert 'except Article 4a on page 11 of Cm 1934'. Amendment No. 325, in page 1, line 9, after 'II', insert '(except Article 105 on page 21 of Cm 1934)'. Amendment No. 326, in page 1, line 9, after 'II', insert '(except Article 105a on page 21 of Cm 1934)'. Amendment No. 327, in page 1, line 9, after 'II', insert '(except Article 108 on page 22 of Cm 1934)'. Amendment No. 328, in page 1, line 9, after 'II', insert '(except Article 109 on page 23 of Cm 1934)'. Amendment No. 372, in page 1, line 9, after 'II', insert 'except Article 104 as referred to in Article in G on page 19 of Command Paper number 1934'. Amendment No. 373, in page 1, line 9, after 'II', insert 'except Article 104a as referred to in Article G on page 19 of Command Paper number 1934'. Amendment No. 374, in page 1, line 9, after 'II', insert 'except Article 104b as referred to in Article G on page 19 of Command Paper number 1934'. Amendment No. 375, in page 1, line 9, after 'II', insert 'except Article 105a as referred to in Article G on page 21 of Command Paper number 1934'. Amendment No. 376, in page 1, line 9, after 'II', insert 'except Article 109 as referred to in Article G on page 23 of Command Paper number 1934'. Amendment No. 377, in page 1, line 9, after 'II', insert 'except Article 109a as referred to in Article G on page 23 of Command Paper number 1934'. Amendment No. 378, in page 1, line 9, after 'II', insert 'except Article 109b as referred to in Article G on page 24 of Command Paper number 1934'. Amendment No. 379, in page 1, line 9, after 'II', insert 'except Article 109d as referred to in Article G on page 25 of Command Paper number 1934'. Amendment No. 408, in page 1, line 9, after 'II', insert '(except Article 30 of Protocol 3 on the Statute of the European System of Central Banks and the European Central Bank on pages 97 and 98 of Cm 1934).'. Amendment No. 49, in page 1, line 10, after '1992', insert 'but not Article 105 in Title II thereof'. Amendment No. 50, in page 1, line 10, after '1992', insert 'but not Article 107 in Title II thereof'. Amendment No. 59, in page 1, line 10, after '1992', insert 'but not the Protocol on the statute of the European System of central banks and of the European Central Bank.'. Amendment No. 253, in page 1, line 10, after '1992', insert 'but not Article 37 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 254, in page 1, line 10, after '1992', insert 'but not Article 42 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 255, in page 1, line 10, after '1992', insert 'but not Article 31.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 256, in page 1, line 10, after '1992', insert 'but not Article 34.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 257, in page 1, line 10, after '1992', insert 'but not Article 29 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 258, in page 1, line 10, after '1992', insert 'but not Article 30 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank". Amendment No. 259, in page 1, line 10, after '1992', insert 'but not Article 21.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 260, in page 1, line 10, after '1992', insert 'but not Article 28.3 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 261, in page 1, line 10, after '1992', insert 'but not Article 18.2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 262, in page 1, line 10, after '1992', insert 'but not Article 19.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 263, in page 1, line 10, after '1992', insert 'but not Article 14.4 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 264, in page 1, line 10, after '1992', insert 'but not Article 16 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 265, in page 1, line 10, after '1992', insert 'but not Article 14.2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 266, in page 1, line 10, after '1992', insert 'but not Article 14.3 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 267, in page 1, line 10, after '1992', insert 'but not Article 10.2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 268, in page 1, line 10, after '1992', insert 'but not Article 12.1 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 269, in page 1, line 10, after '1992', insert 'but not Article 7 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 270, in page 1, line 10, after '1992', insert 'but not Article 6.2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 271, in page 1, line 10, after '1992', insert 'but not Article 2 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 272, in page 1, line 10, after '1992', insert 'but not Article 5.3 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank'. Amendment No. 441, in page 1, line 10, after '1992', insert 'but not the Protocol on France on page 117 of Cm. 1934'. Amendment No. 442, in page 1, line 10, after '1992', insert 'but not the Protocol on Portugal on page 114 of Cm. 1934'. New clause 1—Annual Report by Bank of England.—'In implementing Article 108 of Title II of the Treaty on European Union, and ensuring compatibility of the statutes of the national central bank, Her Majesty's Government shall, by order, make provision for the Governor of the Bank of England to make an annual report to Parliament, which shall be subject to approval by a Resolution of the Commons House of Parliament.'. New clause 58—Accountability of European Central Bank' .In implementing the provisions of Article 108 of Title II of the Treaty on European Union, the Commons House of Parliament shall consider annually the European Central Bank report provided for in Article 109b(3) on the activities of the European System of Central Banks and on the monetary policy of both the previous and current year.'. Amendment No. 85, new schedule:— 'MONETARY POLICY AND THE ESTABLISHMENT OF THE EUROPEAN SYSTEM OF CENTRAL BANKS

  1. (1) Article 105.
  2. (2) Article 105a.
  3. (3) Article 106.
  4. (4) Article 107.
  5. (5) Article 109a.
  6. (6) Article 109b.
  7. (7) Protocol on the Statute of European System of Central Banks and of the European Central Bank.'.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

Let me make it clear that amendment No. 36, as with similar amendments tabled in other groups, is a probing amendment, and it is not our intention to press it to a vote. However, new clause 1 and new clause 58, which we have also tabled, are also in the group, and they relate to the important questions of the accountability of the Bank of England and of the European central bank. We intend to press those to a vote.

I make it clear at the outset that the Labour party's views on the issues before us are set in the context of the vital importance of two requirements: first, that the provisions of article 2 of the treaty set the goals of the Community, and that the economic institutions of the Community are obliged to put those goals into effect; and, secondly, that ECOFIN—the Council of European Finance Ministers—must be strengthened not only as the proper political counterweight to the system of central banks but as an effective co-ordinator of Community policies for jobs and sustainable growth. An important complaint about the Government's record is that during their presidency of the Community they took no initiative to give ECOFIN that enhanced role.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

Will the hon. Gentleman make it clear that new clause 1 is a joke, because it simply says that there should be an annual report? That will have no impact, and there will be no power, because we shall simply talk about the annual report. The issue behind amendment No. 36 is whether a central bank should be democratically accountable. As a member of the Labour party and a friend of democracy, surely the hon. Gentleman should support an amendment saying that a central bank that will run our economy should be democratically accountable in some way. Was that not Labour party policy?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

I well understand the hon. Gentleman's lack of confidence in the Conservatives' custodianship of accountability and democracy. I shall take no lectures from him or from any other Conservative Member on those issues. New clause 1 would not merely require an annual report to be submitted to the House, but would provide the opportunity for a vote on it. That would give the House a form of accountability that is not available to it now. Therefore, it would strengthen rather than weaken accountability.

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

It is correct that there is no annual report, but my hon. Friend will know that under the Bank of England Act 1946, passed by a very right-wing Labour Chancellor, Hugh Dalton, the Bank of England became publicly owned, the Treasury could give instructions to the Bank of England on any matter that it wished for which accountability existed, and the bank could give instructions to any other bank that it wished—and the Treasury defined what a bank was. There could be no clearer example of governmental and parliamentary accountability for the Bank of England. Am I right in supposing that that is what the Front-Bench spokesmen wish to abandon?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury) 5:45, 24 March 1993

Later in my speech I shall deal with the 1946 Act. Indeed, I intended to quote what Hugh Dalton said on Second Reading of that Act. In the light of my right hon. Friend's characterisation of Hugh Dalton, I might reconsider that intention—but the point that I was making still stands good: the House would receive a report that it does not now receive, and would have the opportunity to vote, which it does not now have.

Photo of Bill Cash Bill Cash , Stafford

The hon. Gentleman's new clause refers to ensuring compatibility of the statutes of the national central bank. In the light of the protocol on the European Monetary Institute stage 2, let alone stage 3, is the hon. Gentleman saying that he expects section 4 of the Bank of England Act 1946 to be repealed? In other words, does he want an independent central bank in this country? If so, how does he relate that to the concession that he has already made, in that there will be no arrangements for the central bank in Europe to be accountable?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

I shall deal with those issues in a moment, but it is clear to me that if the House of Commons, and Britain, want to honour the terms of the Maastricht treaty, those matters must be examined. There can be no doubt about that, but it would be premature to prejudge now precisely what form of amendment would be necessary to ensure compatibility between our statutes and the treaty.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

I should like to make a little more progress, if I may.

In debating the group of amendments and, to some extent, the two groups that will follow, the Committee is engaged in that most precarious of activities against which politicians are wisely cautioned—answering hypothetical questions. That is so, because—

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

I shall give way in a moment.

We have to answer hypothetical questions because none of us can be sure whether the European central bank and its associated system will be established under the Bill—or rather, under the treaty—whether economic and monetary union will proceed and, if it does, whether that will happen precisely according to the timetable and provisions of the Maastricht treaty. The terms of such a move to stage 3 would in any case have to be placed before Parliament in future. Indeed, our amendment No. 35, which will be dealt with in the later group of amendments concerning European monetary union, is an attempt to set the circumstances in which that could happen.

It is interesting that the German Parliament incorporated a similar provision during its deliberations approving the Maastricht treaty.

Photo of Austin Mitchell Austin Mitchell , Great Grimsby

I am grateful to my hon. Friend; he has been most generous in giving way.

Surely the question is not hypothetical. It is no use saying that we shall have to consider such matters later. The treaty is specific: When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the statute of the ESCB, neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body. We shall not be able to give instructions to the Bank of England on the lines of the 1946 Act. It will therefore have to be changed.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

I take my hon. Friend's point, but let me repeat that what is in the Bill is conditional on certain things happening before progress towards economic and monetary union can proceed. Indeed, our amendments set further conditions to be satisfied before progress to the third stage of economic and monetary union can take place. Those amendments were designed precisely to meet the concerns expressed within the Labour party and beyond.

Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil and Rhymney

I apologise for interrupting my hon. Friend again, but he cannot make that case. There is a specific and clear commitment in article 14.2 of the protocol on the statutes of the bank: The statutes of the national central banks shall, in particular, provide that the term of office of a Governor of a national central bank shall be no less than 5 years"; and article 14.1 says that the statutes of the national bank must be compatible with this Treaty and this Statute. In other words, if we pass the treaty we shall bind for the future the terms and character of any national bank that we may have.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

We should be binding the future of the central bank only if we proceeded to economic and monetary union, and that depends on conditions yet to be assessed by the Committee and upon which the Committee will have a further opportunity for debate.

6 pm

Photo of Bill Cash Bill Cash , Stafford

On a point of order, Mr. Lofthouse. I am sure that the hon. Gentleman in no way seeks to mislead the Committee, but, under article 8 of the protocol relating to the European Monetary Institute, no instructions may be given or sought by the Governor of the Bank of England. If the hon. Gentleman confuses matters by continually referring to stage 3 when stage 2 contains those provisions, the Committee could be seriously misled.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

I hope that the hon. Gentleman will not confuse the occupant of the Chair by raising points of order that are not points of order.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

The hon. Member for Stafford (Mr. Cash) has not been slow to contribute to the Committee's proceedings in the past, and I am sure that he will have an opportunity later to make those points—quite possibly at some length.

As regards the United Kingdom, that conditionality arises from the treaty; from the challenges to and weaknesses within the exchange rate mechanism; and also from the Government's deliberate decision to seek to buy peace in their own ranks—unsuccessfully, as we have seen—by trying to face both ways at once, on the issue of economic and monetary union as on so much else.

Although at one level that strategy might seem quite clever, enabling us, the Government have argued, to retain a right to a voice in the shaping of the system while leaving until later any decision whether to take part in that system, at other levels it is deeply flawed. First, it leaves the Government with apparently nothing to say on the important question of the principle of participation in economic and monetary union for Europe—surely one of the most important political decisions of our times.

Secondly, the Government's very agnosticism encourages those who would see some viability in Europe developing on a multi-speed basis—a Europe of several divisions in which Britain was not in the top division. I believe that such speculation is dangerous not only for Europe but for Britain. As a consequence of the Government's economic failures, people are coming to believe that Britain is not capable of first-division status. Let me make it clear that the Labour party does not find acceptable any prospect for closer European co-operation and integration that does not have Britain firmly in the first division.

There is a real danger that some of our Community partners will finally lose patience with the Tories' two-faced foot dragging and decide that some of the Twelve should push on alone with economic and monetary union. That would be a serious blow. It would make Britain a less attractive place in which to invest, thereby jeopardising still more jobs. It would threaten Britain's position as a leading international financial centre. Most serious of all, it would once again leave the United Kingdom in the position of having at some future date to apply to join a union that others had taken the lead in establishing and has therefore had the decisive influence in shaping.

Already, with the United Kingdom opt-outs in the Maastricht treaty, Britain's inability to stay within the ERM and the underlying weakness of the British economy, the United Kingdom is being marginalised and is losing opportunities to shape important events. The Government's position on the European system of central banks and the position of the Bank of England could well reinforce those already very damaging signals, locking Britain out and depriving us of the influence that we need over the evolution of Community monetary policy. As with other aspects of the Bill, the choice facing us is not between influence through the pooling of sovereignty on the one hand and influence outside that pooling on the other; it is a choice between influence through the Community and precious little influence at all.

On the question of the status of the central banks, it is clear that the European central bank would need to be independent in its day-to-day organisations.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

For reasons that I am about to explain. Without the establishment of a European Government and a European Finance Ministry—the apparatus of the European super-state to which we are not committed and to which Conservative Members who intervene from a sedentary position are wholeheartedly opposed—there is no political institution under whose day-to-day control it would be practical to place the bank, even if such a prospect were acceptable to our European partners, which plainly it is not.

Photo of Ken Livingstone Ken Livingstone , Brent East

So you are going to leave it to the bankers?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

Does my hon. Friend wish to intervene?

Photo of Ken Livingstone Ken Livingstone , Brent East

What my hon. Friend is saying is absolutely true. There is no political structure to oversee the bank, so the powers will go to an unelected committee of bankers—not even a committee of bankers in which each nation has a vote of equal weight. The votes are weighted to reflect GDP, so our vote will be one of the smallest per head of population in the Community. Who will take vital political decisions affecting the parity of the new European currency against the dollar and the yen and determine our interest rates? I agree with everything that my hon. Friend says, but will he now tell us whether he is happy to leave it to the bankers?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

My hon. Friend is wrong on the last point, because article 109 of the treaty specifically provides that the Council of Finance Ministers shall set exchange rates of the European currencies against currencies outside the Community and, what is more, that the decision of the Council in that respect shall be binding on the banking system. Far from the bankers having control over the politicians, as my hon. Friend suggests, it will be the other way round.

I said that there was not a political institution to exercise day-to-day control over a European central bank. The question of having and building up the role of an institution that can set the economic policy framework within which the bank has to operate—and to which, in my view, it ought to be accountable—as well as setting the external exchange rate of the Community currencies is quite another matter.

In that respect, it is important to ensure that, as a counterpart to the position of the European central bank, European economic policy co-ordination under article 103 is more effectively exercised jointly by the member states, through an enhanced role for ECOFIN. We address those matters in amendment No. 420, which falls in a subsequent group. In relation to an evaluation of the provisions of the treaty dealing with the central bank, it is important that ECOFIN should be strengthened.

Photo of Mr Ron Leighton Mr Ron Leighton , Newham North East

My hon. Friend is right in saying that it is the Council that will have control over the exchange rate of the ECU. The same arrangements will apply as with the Bundesbank. The Bundesbank does not control the exchange rate of the mark. That is why it allows the strange arrangement with east Germany. The Bundesbank is responsible for the internal value of the mark. The central bank would be a bank based on the model of the Bundesbank, which has an extremely large measure of independence and autonomy.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

My hon. Friend confirms that the Bundesbank—which I agree has, to a large extent, been taken as a model for the banking arrangements in the treaty—operates within a politically determined context of economic policy. On important issues such as the exchange rate and the parity between the deutschmark and the ostmark, it was the Government and the accountable politicians whose view prevailed and not that of the bank. My point was that ECOFIN needed to be strengthened.

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

My hon. Friend and I and every hon. Member may well be candidates in a general election. Suppose that the arrangements go through. What can my hon. Friend say about the economic policy of his party—or any party—that could conceivably be implemented if that party were elected, given that the decisions will be taken not by elected people but by the bank and ECOFIN, which may reflect quite different opinions which could not in any way be influenced by a change of Government in any one country?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

What I would say, and what I am sure the Labour party would say, is that, in government, we would be using our influence in Europe to press for co-ordinated policies for economic expansion and jobs so that the Community became an engine of recovery and not an instrument of deflation.

In returning to the question of the status of the central bank, I should make clear Labour's first key demand. It is that the European central bank must be established through public ownership and that the Bank of England must remain in public ownership. There can be no question, as some have suggested there might be, of the bank being privatised.

Several hon. Members:

rose

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

I must make progress.

When Hugh Dalton, the then Labour Chancellor of the Exchequer, moved the Second Reading of the measure which nationalised the Bank of England, he said that there were two key arguments to support it. He said: The first is that this Bill in effect brings the law into relation with the facts as they have gradually evolved over the years… The second line of argument is even more important. It is that by this Bill we ensure a smooth and efficient growth of our financial banking system in order to meet the new needs for the future"—[Official Report, 29 October 1945; Vol. 415, c. 46.] We now best promote the needs of the Community and of the United Kingdom for an effective central banking system by holding faith with the principles that Hugh Dalton set out 48 years ago. The bank must remain in public ownership and it must be made clear, contrary to what some have supposed, that privatisation is not an option. It would be neither in the public interest nor in the interests of the effective discharge of the responsibilities of a modern central bank.

Photo of Peter Tapsell Peter Tapsell , Linsey East

The hon. Gentleman speaks of the need for the Bank of England to be in public ownership after the arrangements come into effect. What would be the point of the British people owning a Bank of England which would be just a provincial branch of the European central bank?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

Precisely so that the body follows objectives which are in the public interest, determined within a democratically accountable political context, rather than pursuing the interests of private shareholders; and I shall say more about the legal status of the bank.

Our second key concern is with accountability, which, while it is not the same as the day-to-day control of the bank, remains important. Indeed, this examination of the issues provides us with an opportunity to take a radical look at the functions and organisation of the central banking system to ensure that they serve the people and the needs of the future.

We on the Opposition Benches have made it clear that we believe there is a strong case for examining the separation of the responsibilities that the bank has for monetary matters from its role in supervising financial institutions. Now is the time to consider going further in making the bank more accountable and representative, for example, of regional, industrial and employment needs.

Our new clause 59 called for precisely such reform of the membership of the governing council of the bank in the context of the Bill. Sadly, it has not been selected for debate. But our proposal in new clause 1, which has been selected, would be a big step forward in making the bank more accountable. There would be a report to Parliament, a debate and a vote. There would be more accountability directly to hon. Members. Further, there would be transparency in relations between the bank and the Government of the day, which would open up decision-taking in economic policy, with benefits in terms of public scrutiny and confidence.

Photo of Mr Tony Marlow Mr Tony Marlow , Northampton North

The hon. Gentleman explained the purposes of new clause 1 and said that we would debate it and vote on it. Has he considered the position if the vote goes in favour of the new clause? What would be the result here and in Europe? What would it do for European legislation? The hon. Gentleman said that we want to be in the first division if there is a two-speed Europe. That must mean our currency being something like the franc fort, as it has been under socialist France. That has resulted in the socialists getting less than 18 per cent. of the vote in the general election there. Is that what the hon. Gentleman wants for his party in this country?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury) 6:15, 24 March 1993

I should have thought, following President Clinton's remarks last night, that the hon. Gentleman would have hesitated before suggesting interfering in the elections of other countries. I should also have thought that a vote in this House which rejected the report of the Governor of the Bank of England or the report on the European system of central banks would be taken very seriously indeed. The hon. Gentleman should not minimise the influence that we could have via that route.

Our next area of concern is the relationship between the European central bank and the system of central banks and the politically determined framework for economic policy in the Community. In particular, we are concerned that ECOFIN should operate as a politically accountable counterpart of any European central bank. It is important to appreciate that the treaty as drafted gives ECOFIN a role in monetary policy.

For example, as I pointed out to my hon. Friend the Member for Brent, East (Mr. Livingstone), under article 109, the responsibility for exchange rate policy rests with the Council. That applies to exchange rate system agreements in relation to non-Community currencies and in the negotiation of such agreements which, as that article makes clear, are binding on the European central bank.

In the medium term, ECOFIN sets the economic framework for monetary policy, for example, through its responsibilities for the broad guidelines of economic policy and for multilateral surveillance under article 103. We want ECOFIN to be strengthened in its role and resources, and to have a permanent secretariat, a subject to which we shall return on a later group of amendments dealing with the transitional second and third stages of EMU. But in terms of monetary policy, it is clearly desirable that any European central bank should report to ECOFIN. That is the sort of issue that should be considered further when the intergovernmental conference takes place in 1996.

Photo of Mr Peter Shore Mr Peter Shore , Bethnal Green and Stepney

My hon. Friend is placing enormous importance on ECOFIN and the powers that a revised ECOFIN might have. Why, if that is on the agenda of the European Community, have no powers been vested in ECOFIN, other than the one which the treaty mentions and my hon. Friend quoted, which is the power to decide the external exchange rate value of the ecu? Why has no other power been given to ECOFIN? Is it because all the other member states do not agree that it should be in the treaty in that way, or is it simply that my hon. Friend is indulging in wishful thinking?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

I am not indulging in wishful thinking. I have argued that the powers should be strengthened, but my right hon. Friend should not underestimate the importance of the responsibilities that ECOFIN has under the treaty. As I said, those responsibilities apply not merely to the determination of the external exchange rate, important though that is for the conduct of monetary policy, but also to multilateral surveillance and the co-ordination of the economic policies of the member states. That, too, is of central importance, and we want it enhanced so as to provide effective co-ordinated European action for sustainable growth and jobs and for the realisation of the other tasks and targets for the Community as set out in article 2.

Photo of Mr Nigel Forman Mr Nigel Forman , Carshalton and Wallington

This is my first intervention in the Maastricht debate. There is advantage in at least half the argument that the hon. Gentleman is adducing—namely, his argument in favour of a degree of statutory accountability to the House of Commons for a future central bank in this country. That would at least ensure a degree of open accountability to this Parliament, as is the case in Washington and the Federal Reserve to Congress, unlike the present position, which has lasted since the Bank of England Act 1946, with closed accountability to the Chancellor of the Exchequer of the day. The hon. Gentleman is right in that part of his argument.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

I have said that there would be increased transparency in relations between the bank and the Government and, for that matter, between the bank and the House of Commons.

As for enhancing the powers of ECOFIN, we note that the Foreign Secretary was recently reported to be scouting around for ideas for Britain to submit to the intergovernmental conference to be held before the end of 1996. We generously donate the proposal that the powers of ECOFIN be substantially enhanced. I hope that the Foreign Secretary will carry the proposal forward and acknowledge its genesis.

In debating this matter, it is important that we do not react as a House of Commons or, more widely, as a country with the rancid conservatism of old institutions resisting change, rather than engaging constructively in the possibilities of change. As Will Hutton, the economics editor of The Guardian, said at a meeting on this subject, one of the specific difficulties which many in Britain, and especially in England, have with the concept of an independent central bank is grappling with the concept of pluralism in political and economic institutions.

We need to recognise that there can be democratically determined public institutions working within a framework of law which have an obligation to pursue defined objectives of public interest in ways which are accountable but which are free from day-to-day control of the Government, if never dissociated from their influence and the wider policy framework. If we are to progress to economic and monetary union in Europe, this is the light in which we must judge the status of the central bank and the Bank of England.

Photo of Mr Denzil Davies Mr Denzil Davies , Llanelli

My hon. Friend talked about the day-to-day activities of a central bank. By "day-to-day", he means the fixing of interest rates. Is he saying that it is preferable that that should be done solely by bankers or, ultimately, by the Chancellor of the Exchequer and the Prime Minister, as it is in Britain at present?

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

First, day-to-day control, even of short-term interest rates, will inevitably be influenced by the policy on the external value of the exchange rate, which, as the treaty makes clear, is a matter for the politically accountable ECOFIN. The second point is how much long-term freedom Britain will have to set interest rates within the context of an increasingly powerful European economic union.

If we are to progress to economic and monetary union in Europe, the light in which we must judge the status of the central bank and the Bank of England is that which recognises the possibilities of genuine pluralism within accountable institutions that serve the public interest.

The challenges before us with regard to this part of the Bill present an opportunity for reform—to make it not so much a Bank of England, but rather more a bank for Britain, just as we would expect the European central bank to serve the interests of the Community as a whole with regard to the goals of article 2 of the treaty and within a framework of democratically co-ordinated economic policy. Those are our aims. I commend new clause 1 and new clause 58 to the Committee.

Photo of Peter Tapsell Peter Tapsell , Linsey East

I have always thought that one of the redeeming features of the Rome treaty is that it did not seek to regulate financial matters. That has permitted the enormous increase in the volume of international financial business which has taken place in the City of London during the 35 years that I have worked in those markets, and has enabled that increase to take place without being hindered in any way by Brussels.

It is difficult to believe that during the 1970s—broadly speaking, a period of great weakness for the British economy and British manufacturing industry—the Eurodollar and Euroyen markets were established in the City of London. To this day, the City of London has remained the capital of those vast markets, which earn an enormous amount of foreign exchange for the United Kingdom and give us influence in the world which perhaps we do not achieve in many other respects. It is difficult to believe that, if we had been subject to interventions from Brussels and the Commission in the 1970s and subsequently, and if a European central bank had been in place which was anxious to develop financial centres in different parts of Europe, that degree of success could have been achieved by the City of London.

The continental financial centres have always been intensely jealous of London's primacy and will certainly use the provisions of the Maastricht treaty to reduce it. Perhaps it is worth noting that, before 1973, when we entered the Common Market, we had a surplus in our trade with the then six countries of the European Economic Community which has since turned into a massive deficit. During that same period, the European financial primacy of the City of London steadily increased. The contrast is striking between the industrial position where we have been increasingly the subject of European provisions and the financial position where we have been free to pursue our traditional policies of trading with the world.

In contrast with the Rome treaty and the Single European Act, financial provisions lie at the heart of the Maastricht treaty. Its core is economic and monetary union. The engine of such union is to be the European central bank. As fiscal and monetary policies should march together in any properly conducted economic policy, economic and monetary union which is operated by a European central bank will take away from those nation states which make up the European union the freedom to issue their own currency, to choose their own interest rates, exchange rates, the level of their money supply and the level of their public expenditure and to decide the level of their own taxation.

In other words, European and monetary union will remove all the characteristics, of sovereignty which characterise a proud and independent nation, and which still to this day give to the British one of the few binding characteristics of discipline that entitle us to call ourselves a great nation. All that will be put at risk. The European central bank, together with the Commission, will have the exclusive right to exercise all the powers throughout Europe to which I have referred and the sole power to print money and control the currency which the British will use.

Effectively, the European central bank will become the most powerful economic, and therefore political, institution in the Community—indeed, in the whole free world. With 12 or more Ministers of Finance to play off against one another, any skilful president of the European central bank will be in a more powerful position that Mr. Delors has ever been. As the directors of the bank will be explicitly, deliberately and absolutely unelected, unaccountable and unassailable, I do not know what the hon. Member for Oxford, East (Mr. Smith) meant when he said that we will have to be careful in those circumstances to ensure that the Bank of England remains in public ownership. It will not matter two hoots who owns the Bank of England or, indeed, whether there is a Bank of England in the circumstances laid down by the Maastricht treaty.

The hon. Member for Great Grimsby (Mr. Mitchell) read out article 107 on a point of order before the debate. At the risk of boring the Committee I should like again to put on the record in my speech just what article 107 says. The words of article 107 are perfectly clear. A child of 16 could understand them. I am rather bored with people telling me not to bother to take the words of the treaty seriously.

I am rather bored with Ministers, retired ambassadors and grandees in the City taking me on one side and saying in a patronising way, "Can't you be a little more sophisticated in your approach to the Maastricht treaty? We all understand that the treaty is a nonsense. It is absolutely unworkable. It will never take effect. But, my boy"—I am getting somewhat elderly to be addressed in that way, but that is the tone of voice—" if we vote against the Maastricht treaty, we shall lose all our influence in Europe. Therefore, you must vote for this ludicrous, unworkable treaty. Don't let's worry about the wording of it." Ministers who sign contracts and treaties without worrying about the wording will be in some danger of being thought to have wined and dined a little too frequently with their Italian counterparts.

Photo of Peter Tapsell Peter Tapsell , Linsey East

I have not dined with an Italian Minister for some months. The last time was with the then Foreign Minister of Italy, who is now being prosecuted for corruption.

Photo of Mr Ivan Lawrence Mr Ivan Lawrence , Burton

I hesitate to interrupt my hon. Friend's flow, but does he agree that the warning that we shall lose influence if we do not sign up to the Maastricht treaty is exactly the same as the warning that will be given in 1997 when we refuse to sign up to the single currency, the central bank and central economic control? The same argument will hold. If we do not do it, we shall lose influence in Europe. That is not what the Government have in mind to do. There is an illogicality about their actions.

Photo of Peter Tapsell Peter Tapsell , Linsey East

I agree with my hon. and learned Friend. If I might make a party political point on behalf of the Conservative party, I have never been able to understand the political thinking that, although we have theoretically opted out of the single European currency and economic and monetary union until 1996, we shall seize the nettle in 1996 on the eve of the next general election. When we do that, Lord Cardigan at Balaclava will look like a cunning strategic manoeuvrer by comparison with the Conservative party. The Whips alone will be asked to charge the guns.

Article 107 is the governing paragraph. There are an immense number of selected articles, paragraphs and protocols. I am not an expert on the treaty like many of my hon. Friends. I have been referred to several other subsections but it seems to me that article 107 is clear. It says: When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the Statute of the ESCB, neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies"—

Photo of Peter Tapsell Peter Tapsell , Linsey East

Indeed, shall— from any government of a Member State, or from any other body. The Community institutions and bodies and the governments of the Member states undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks.

Photo of David Winnick David Winnick , Walsall North

Will the hon. Gentleman give way?

Photo of Peter Tapsell Peter Tapsell , Linsey East

I shall draw two conclusions from article 107, and then I shall give way.

First, the words seem perfectly clear. Secondly, new clause 1 and new clause 58 drive a coach and horses through article 107. With respect, I slightly differ on the new clauses we are debating from my hon. Friends the Members for Southend, East (Sir T. Taylor) and for Stafford (Mr. Cash), who made the point a few moments ago about these Labour amendments.

I shall deal with the provisions of the Federal and Reserve Board and the Bundesbank later. I am rather more familiar with them than with the treaty. However, the fact remains that we shall not be allowed to influence the European central bank in any way. Any body or individual which sought to do so could presumably be summoned before the European Court and punished by a fine.

Photo of David Winnick David Winnick , Walsall North

A few moments ago, the hon. Gentleman said that it did not make any difference whether the Bank of England existed under the proposed arrangements. Would not the same apply to the House of Commons? If such power is to be transferred, as undoubtedly it will be, what will be left to the House of Commons?

The hon. Gentleman read out article 107. Monetary policy will be decided in the way in which article 107 makes clear. The House could debate various matters in a county council way, but on major financial and monetary policies, power will have been transferred. Therefore, not merely the Bank of England but our parliamentary and democratic institutions are at stake.

Photo of Peter Tapsell Peter Tapsell , Linsey East

I agree with the hon. Gentleman, who represents a part of England which I contested in my first by-election almost 40 years ago. He speaks with admirable black country good sense. May I add that one of the reasons why these debates take so long is that we all seem to prompt each other with helpful remarks. While I entirely agree with both the interventions that I have taken so far, they only delayed my speech. They echoed things that I intended to say rather less gracefully in my own speech. So if I am not to speak at inordinate length, I should be grateful to be allowed to put the anti-Maastricht case unassisted by my friends.

Photo of Mr Ron Leighton Mr Ron Leighton , Newham North East

I hope that I shall not take the hon. Gentleman away from his speech. He read out article 107, which says that the institutions must not seek to influence the central bank. Does he understand that to include the famous ECOFIN?

Photo of Peter Tapsell Peter Tapsell , Linsey East

The hon. Member for Oxford, East quoted article 109. It says that the Council would have to be unanimous in acting on anything to do with the external exchange rate. I see the Financial Secretary shaking his head. I am not a lawyer. In any case, lawyers never seem to agree about anything in the treaty. If we have a single currency, it is difficult to envisage 12, 15 or 18 Finance Ministers agreeing on the correct external exchange rate for us all. In the past 18 months, we in Britain wanted a different external exchange rate from that which Germany wanted. I simply cannot envisage all the Ministers agreeing.

I shall press on with my speech now. I have quoted article 107. We are expressly forbidden by the treaty from ever seeking to influence the decisions taken by a group of unelected foreigners. Those decisions will have the most profound impact on the welfare, prosperity, employment and wealth of our constituents.

It is incomprehensible to me how the Labour party can have become sympathetic to the treaty. I have always been accused of being a left-wing Tory. I am proud of that. One of my characteristics throughout my political life has been my passionate concern to maintain the highest possible level of employment. I thought that the White Paper of 1944 which laid down a full employment policy and a target for unemployment of 3 per cent., and which was agreed by all the parties at the time, set the correct aim. It may be difficult to achieve, but it is the correct aim.

It is absolutely certain that, if we enter into the arrangements for a single central bank and a single currency, the system will be banker-dominated, and levels of unemployment throughout Europe will for ever be much higher than most of us in Britain would want to see. Those on the Labour Front Bench must understand that, in supporting the financial provisions of the Maastricht treaty, they are voting for permanent high unemployment in Britain. I am not making a party political point; it is my profound conviction that that is the certain consequence of the policy. I do not deny that it may have other advantages in terms of future inflation and so on, but I am absolutely certain that it will lead to permanent high unemployment in Britain.

Photo of Clive Betts Clive Betts , Sheffield, Attercliffe

Is the hon. Gentleman saying that there is any realistic possibility for Britain as an independent nation outside the European Community achieving the full employment that he seeks as an objective? Is he saying that the alternative is to be outside the European Community in order to have any realistic chance of achieving those objectives?

Photo of Peter Tapsell Peter Tapsell , Linsey East

I am not suggesting that we should leave the European Community. In 1961, I voted in favour of the original application to join the Common Market. I also voted in favour of the Single European Act and the acceptance of the treaty of Rome. Our membership of the European Community is not at risk.

I am convinced that, if we remain within the Community and the single European market, we can pursue an extremely successful industrial and financial policy trading with the whole world, and that we would have a much more successful role in that position than if we were part of a European monetary and political union.

Photo of Peter Tapsell Peter Tapsell , Linsey East

I really must get on; otherwise, I shall never finish. I have not even begun to approach the core of my speech.

Photo of Bernard Jenkin Bernard Jenkin , Colchester North

Is my hon. Friend aware of a country which in 1966 took a negative approach towards the European Community in defence of its national interests and left an empty chair? However, since then, France has established itself very much at the heart of the European Community. I saw an article written at the time by my noble Friend Lord Lawson pointing out that we could now join the European Community, as France had left an empty chair. Although France took an anti-communautaire attitude, it subsequently established itself at the heart of the European Community.

Photo of Peter Tapsell Peter Tapsell , Linsey East

My hon. Friend is absolutely right. Of course, France will always be a leading state in the European Community, as will Britain. However, France has already suffered terribly from its franc fort policies and its continued membership of the exchange rate mechanism. Last Sunday, the people of France gave a clear indication of their feelings, which they will reaffirm next Sunday. My expectation is that there will be fundamental changes in French economic policy in the months ahead.

I am glad to see my hon. Friend the Financial Secretary in his place, because I want to refer to our friendly exchanges on 14 January, which underline my anxieties and the differences between the declared policies of Ministers, whatever their private views may be, and the views that I express in public.

As has been echoed by the hon. Member for Oxford, East and others, hon. Members, friends and business associates around the world have often asked me why I am so concerned about an independent central bank, when the United States and Germany have independent central banks. To my astonishment, Lord Lawson was apparently a secret believer in an independent central bank. Like the Prime Minister, he was part of a silent minority. Apparently there were a lot of silent minorities in Lady Thatcher's Cabinet.

As there are independent central banks in Germany and the United States, which are clearly democratic countries, people ask me why I am concerned that we cannot do the same in Britain and Europe. I want to address that argument.

6.45 pm

On 14 January 1993, I asked my hon. Friend the Financial Secretary: since, throughout our history we have never thought it right to establish an autonomous central bank, run by our own fellow countrymen, why should we now in any circumstances wish to set up an autonomous central bank run by foreigners My hon. Friend replied: If my hon. Friend…takes the view that in no circumstances can he contemplate a monetary authority that is not, first, combined with economic policy…and second, that is responsible 100 per cent. to the House, he clearly cannot in any circumstances support a single currency that circulates in 12 member states of the European Community. That is the consequences of taking such a position. As I said at the time, my hon. Friend the Financial Secretary puts matters with absolute clarity, and those words of his exactly express my position and the reasons for it.

He went on: It seems to me rather odd to argue that the United States or Germany…are any less democratic as the result of the institutions that they have chosen to establish. I said: May I define what I mean by autonomous? I mean a central bank that is not democratically accountable to democratically elected Ministers answerable to a democratic assembly. So even if we had a single European currency, I would argue strongly that we need to have a single European bank that is democratically accountable and answerable—and that is what we do not have in the Maastricht treaty. My hon. Friend the Financial Secretary replied: I understand the point that my hon. Friend makes, but I invite him to design a workable system for a European central bank that is politically accountable to a European political process. I do not believe that it will be easy to do".—[Official Report, 14 January 1993; Vol. 216, c. 1141–42.] That is absolutely true. It is not a question of it not being easy to establish a European central bank that is democratically accountable; it is impossible. The Financial Secretary in effect admitted that. He may wish to qualify that answer when he replies to the debate, but I congratulated him at the time on his clarity.

I should like to consider the word "independence". The present Governor of the Bank of England, for whom I have great personal regard and for whose recent personal bereavement we all feel extremely sad, said that he favoured an independent central bank, as did his nominated successor. I wonder whether they really mean what they say.

The word "independence" is often misused. The matter rests not on independence but on accountability. Real independence—that is, non-accountability to a democratically elected body or democratically chosen Ministers—is not possible in a democratic society, as my hon. Friend the Financial Secretary accepted in his reply to me on 14 January.

Let me turn first to the Fed in the United States, and examine to what extent it is really independent and unaccountable. I have had a lot to do with the Fed in the past 30 years. I have known the last four chairmen, and I think I know how the Fed works. I have been there perhaps 30 or 40 times in my life, and I have sat in on all sorts of functions there and attended congressional inquiries, and I feel that I understand how the Fed works. It bears not the smallest resemblance to the European central bank that is described in article 107, which I read out, and in all the supporting provisions of the Maastricht treaty.

In the United States of America, the Federal Reserve Board is wholly accountable to Congress. I invite Ministers to ask any governor of the Fed or any senior congressman or senator whether the Fed is accountable to Congress. The answer will be yes. The Fed was established by Congress, the law governing every activity of the Fed can be changed at any time by Congress, and the Fed remains wholly accountable to Congress. The governors of the Fed have a legal obligation to report to Congress twice a year.

That is why I do not dismiss out of hand new clause 1 and new clause 58—because, much though I dislike the entire concept, if we were to have something like these Treaty provisions, new clause 1 and new clause 58—if it could be Europeanised, as it were, and not just a British provision—would be some help towards moving the European central bank in the direction of what happens with the Fed in the United States.

Photo of John Butterfill John Butterfill , Bournemouth West

I am following what my hon. Friend says with great interest. Can he just enlighten me as to whether the Fed takes direction from Congress on the conduct of monetary policy or whether it retains an independence in its day-to-day actions in that regard?

Photo of Peter Tapsell Peter Tapsell , Linsey East

It is extremely difficult to give a one-sentence answer to that. It certainly does not take direct instructions.

Photo of Peter Tapsell Peter Tapsell , Linsey East

It is no good my hon. Friend saying, "Ah." Of course it does not take direct instructions like the Bank of England does. The Secretary to the Treasury in America does not stand up, as Lord Lawson, I think mistakenly, did, and announce that he has moved interest rates up or down. It always used to be announced by the Bank of England, and I think that it was a mistake when the Chancellor openly said that he was making the decisions. In any event, that does not happen with the Fed. On the other hand, in the way that I am going to explain, it is subject to tremendous and effective political pressures.

The obvious example of that was at the beginning of President Reagan's first Administration, when there was considerable divergence of opinion on monetary policy between the Fed, most of whose members had been appointed by President Carter, and President Reagan. In the end, President Reagan got his way, but there was a very open debate in the United States, and the chairman of the Fed had to appear repeatedly before Congress and be cross-examined in front of the television cameras, with the whole nation watching and with all the commentators writing. In the end, the Fed came round to accommodate the Reagan economic policies. That is roughly how it works.

I am not suggesting that the Fed takes instructions from the Secretary to the Treasury—the system in America is different—but it does not destroy my argument that the Fed—

Photo of Mr Hugh Dykes Mr Hugh Dykes , Harrow East

It does destroy the argument.

Photo of Peter Tapsell Peter Tapsell , Linsey East

My hon. Friend says that it destroys my argument, but it does not, for reasons that I will explain. The Fed has a legal obligation to report to Congress twice a year. The report is published. The chairman of the Fed is summoned before a congressional committee and is cross-examined at length and in detail on television. These are the basic legal requirements in the United States.

In practice, the chairman of the Fed is frequently questioned by Congress, and usually in front of the television cameras—more than once a month. A former chairman of the Fed complained to me a few years ago that an excessive amount of his time throughout the year was taken up in preparing for congressional interviews and cross-examination, because he was concerned that he might inadvertently, under questioning, mislead markets as to his real intentions. He said that it was very difficult to appear for two hours before a congressional committee and say nothing, which was his intention.

So, far from the chairman of the Fed not being accountable, he is extremely accountable in all these ways, and none of this bears the smallest resemblance to the arrangements in article 107, where nobody is supposed to be allowed to bring any pressure to bear at all on the operation of the European central bank.

Photo of Mr Nigel Forman Mr Nigel Forman , Carshalton and Wallington

I am following my hon. Friend's magisterial speech as closely as I can. Is it not a fact that there is much in the arrangements that have evolved in the United States which is not only attractive in regard to what it does for genuine parliamentary accountability in this area but could provide a model for the future development of the European Community? What I have in mind is a matching of the degree of ex post accountability to the European Parliament for the European system of central banks in future with a similar, transparent accountability, again ex-post, to this Parliament for our own, more independent, central bank in this country. Will my hon. Friend accept that it could be a viable model for future development towards European monetary union?

Photo of Peter Tapsell Peter Tapsell , Linsey East

I agree with my hon. Friend in the points that he has made. If we were to have a European central bank and European union—I am against both concepts—the Fed would be a much better model for us to take than the unworkable, totally undemocratic and unaccountable arrangements set out in the Maastricht treaty. But it is the Maastricht treaty that we are debating, after all, and we have no amendment before the Committee, suggesting that the European central bank be modelled on the Fed. I would be making a rather different speech if that were the case.

The Fed's inability to manoeuvre in exchange rate policy, even short term, is also a major constraint on its independence. The hon. Member for Oxford, East mentioned the fact that this European central bank would not have such complete powers in exchange rate policy as it would have with the internal currency. That matches the arrangements of the Bundesbank. People often point out that the Bundesbank is not as independent as it seems, because, when the two Germanies came together, Chancellor Kohl was able to override President Pöhl's well known wishes about the exchange rates between the two Marks. The same thing happened with the Anschluss in 1938 under the Reichsbank, when Hitler insisted on a much closer relationship between the Austrian schilling and the German deutschmark than the Reichsbank, under Dr. Schacht, wanted, but that is a different point.

Having no responsibility for exchange rate policy at all greatly limits the Fed's powers in the monetary sphere. As I understand the Maastricht treaty, the European central bank would have much more control over exchange rate policy than has the Fed in the United States, where it is specifically excluded from exchange rate policy.

If Congress were to decide that it did not like the way the Fed behaved, at any time it could change the law governing the Fed's activities. But the House of Commons would not be able to do that once the provisions of this treaty came into force. No doubt, if the 12 or 15, or more, nation states that made up the European union ever agreed on a change, it could be brought about, but it is quite unrealistic to suppose that this House alone would be able to make any significant changes to the working of the European central bank. So there is another great difference between the relationship of the Fed to the democratic assembly to which it is answerable and the relationship that the European central bank would later have to this House or this country, or even to the European Community.

Article 107 of the treaty would be anathema to Congress. It would be inconceivable, intolerable and unacceptable if it were to be applied to their own union of states. So why, I ask, do we think that it is acceptable for us? When the Financial Secretary asked me on 14 January why, when the United States had an independent central bank in the Federation, I was worrying about a central bank for Europe, that is the American part of my answer.

Photo of Mr Peter Hordern Mr Peter Hordern , Horsham

Perhaps that is one reason why the protocol states that article 107 shall not apply to the United Kingdom. My hon. Friend may care to reflect on that.

I totally accept that the Federal Reserve Board is accountable to Congress, which treats it in just the way that he describes. However, I think he gave the Committee the impression that there was a glorious period for most of our history when we were totally independent—we had our own way of fixing our currency and were independent of any other country. May I remind him that we were members of the Bretton Woods agreement and were wholly dependent on the United States dollar and the Federal Reserve, and had no independence of any kind?

7 pm

Photo of Peter Tapsell Peter Tapsell , Linsey East

On the first of my hon. Friend's two points, I accept that, because of the opt-out aspect of the protocol that he referred to, we are not governed by that article. As he will know, however, we have to seize that nettle in 1996. Earlier, I pointed out the great political disadvantages if the Conservative party has to go through all these appallingly divisive arguments again on the eve of the next general election. To contemplate doing so would seem to be madness in party political terms, but that is what we are doing by putting off the decision until 1996. That is one reason why I have thrown in my lot completely with the anti-Maastricht group. It is better to get the argument out of the way now, in the first year of this Parliament, than to go through it all again in its last year.

On the question of how independent Britain has ever been, obviously its independence has varied enormously. Prior to Napoleon's Berlin decree codifying the continental system, people were telling Pitt that he had lost independent control of the British currency. It is true that, under Bretton Woods, because of the acute dollar shortage after we had sold our assets all over the world to pay for the war, we were to a large extent in tutelage to the United States, but we escaped it. My hon. Friend the Member for Horsham (Sir P. Horden) suggests that we should now put ourselves in tutelage to the Bundesbank and the German mark, in replacement of the United States currency. I have the highest regard for the United States, but I do not wish us to be one of its colonies; nor do I wish us to live in a German colony.

Everyone talks as though the Bundesbank were such a marvellous organisation that we all ought to model our banks on it. Indeed, I understand that other European countries, such as France, Portugal and Spain, are busy rewriting the provisions for their central banks, with the help of Bundesbank officials, to model them on Bundesbank lines.

One of the things to remember about the Bundesbank, as it is presently constituted, is that it is far more accountable—in the best sense of the word—than the proposed European central bank. Earlier I described what I meant by independence. The Bundesbank is much more accountable than most people realise. For instance, the German Minister of Finance always attends its board meetings, and although he does not have a vote at its council meetings, he is permitted to speak.

I understand from German friends who have held the position that the Minister of the day often speaks at length and with great force at such meetings. He also has the constitutional right to propose motions, although he cannot vote on them, and he can request that the delay of a decision by two weeks. All those are important aspects of accountability, which are built into the Bundesbank's, provisions and there are other more technical arrangements, but I shall not weary the House with those.

None of that accountability is written into the Maastricht treaty for a European central bank and there is not even a suggestion that the President of the Council of Finance Ministers can attend its meetings, address it, ask it to do this or that, or to delay a decision for a fortnight. If one is to believe article 107, the bank will not be accountable to anyone.

Photo of Mr Barry Legg Mr Barry Legg , Milton Keynes South West

Another important difference between the Bundesbank and the European central bank is that the former works with the grain of German public opinion, but a European central bank will not be answerable to any public opinion, because there is no European public opinion as such.

Photo of Peter Tapsell Peter Tapsell , Linsey East

Yes, the latter part of my hon. Friend's comments is true, but I would not presume to comment on the extent to which the Bundesbank operates with the grain of German public opinion. A number of leading German industrialists have been critical of its monetary policies during the past 18 months. The chairman of Deutsche Bank has publicly criticised it, so there is no unanimity, in Germany even, about the wisdom of the Bundesbank's monetary policies. There is no doubt that, for historic reasons, the Bundesbank enjoys enormous prestige in Germany, but that does not mean that it commands universal support for all that it does.

Directors from the German regional central banks outnumber the Bundesbank's directors. The appointment of regional directors has a strong political element, and they feel politically beholden to the people who have appointed them, who are the Mayor Daleys of the German provinces. I do not know any German, but I think that they are called the länder—as most of them are borrowers, I find that confusing. The regional directors are expected to champion the economic interests of their region, and they do so.

As the Chancellor of the Exchequer discovered to his dismay before 16 September, on their way to Frankfurt to attend meetings, the regional directors give little press conferences designed to show their local Bavarian newspaper or wherever what good chaps they are. This may not help the Finance Minister of another country who is desperately trying to protect the parity of his currency. Nevertheless, that is an example of the fact that the Bundesbank is a good deal more accountable than it appears on the surface.

The central bank that I know best is the Bank of Japan, although it is not often mentioned. The Japanese economy has been rather a success story—although it is going through a difficult patch—during the past 25 years, but we hardly ever hear the Bank of Japan quoted as an example for us to model ourselves on. That bank is wholly subordinate to the Japanese Government. The present governor of the Bank of Japan is a distinguished former Treasury official, and he does exactly what the Japanese Cabinet tells him to do. So there is no proof that independence and non-accountability alone or necessarily produce great economic success.

King William III, who was a Dutchman—perhaps the Dutch have a flair for that sort of thing—established our central bank to be independent but accountable, and to be run by our fellow countrymen. Ten of the 11 other member states have always followed suit and have had accountable central banks.

We are told that the Chancellor sings in his bath, but I have less operatic tendencies when I am in my bath. Sometimes I lie there and wonder how we can be prepared to hand over the control of our central bank to a group of foreigners under German domination. I wonder what King William III would have thought about that when he drew up the original charter for the Bank of England to promote the public good and well-being of our people"— of our people. We may be sure that the Bundesbank will never allow a European central bank to manage and issue a single currency which, whatever its name, is anything but the deutschmark in disguise. That is a political and economic fact of life. Nor do I blame it for that. If I were German I should certainly hold that view.

Would any German banker in his senses, or, for that matter, any German citizen or saver, want to have the value of his money—his savings and his wages—determined by a secret compromise with the Greek, Italian and Portuguese directors of the European central bank, whose main interest in the Community is to receive handouts from the richer countries and to protect themselves from their own politicians, for whom they have the utmost contempt? To anybody who has ever moved in the real banking world, the idea is absolutely preposterous. With the great influence of the Whips Office, it is certain that, if the Maastricht provisions for a central bank ever come into force, they will rapidly prove to be totally unworkable.

The history of ideas is always significant and worthy of study. As a boy, I trained as an historian, and reading history has always been my main hobby. When one is told that there is nothing so irresistible as an idea whose time has come—which is what people say, or used to say, about European monetary union—I like to think about the history of the idea. We have all read Marx and Engels—at least, Conservative Members have—and we have all wondered how different the Communist utopia would have been if the first Communist revolution had occurred in some country other than Russia. Chinese leaders have made this point to me. Marx clearly hoped that it would occur in Germany. Thankfully for all of us, it did not.

We ought to reflect where the idea of European monetary union originated. The more idealistic souls among us seem to suppose that European monetary union was the brainchild of that nice M. Jean Monnet. In fact, it was the brainchild of the rather less nice Herr Walther Funk.

The First Deputy Chairman:

Order. The hon. Gentleman is making an excellent speech, but he is straying from the subject of the debate. [SEVERAL HON. MEMBERS: "No."] Order. The Chair says that the hon. Gentleman is straying.

Photo of Peter Tapsell Peter Tapsell , Linsey East

I shall come straight back to order, Mr. Lofthouse.

The First Deputy Chairman:

I shall be very grateful.

Photo of Peter Tapsell Peter Tapsell , Linsey East

Herr Walther Funk was the president of the Reichsbank, the predecessor of the Bundesbank, from 1939 to 1945. My point is that Funk originated the whole concept of European monetary union, which is what we are debating. Surely, therefore, I am very much in order.

European monetary union was not dreamed up by M. Jean Monnet, an idealistic European; the idea was floated in July 1940 by Walther Funk, who was a drunken, homosexual Nazi toady and was subsequently sentenced to life imprisonment by the Nuremberg tribunal. In July 1940, just after the German panzer divisions had overrun western Europe, Funk circulated a number of documents on European monetary union. These are all set out in the recently published excellent book "The History of the Bundesbank" by the distinguished financial journalist David Marsh. I shall not quote at length, but I have to say that the wording of the Maastricht treaty in certain sections follows almost word for word the documents circulated inside the Reichsbank in 1940. The view, which Hitler strongly shared, was that Europe could not be held permanently subordinate to Germany by force of arms alone, that it was necessary to resort to economic and monetary forces to make the domination permanent.

7.15 pm

Mr. David Marsh, at pages 132–3 of his book, says: As the Wehrmacht rampaged across Europe, the success of the blitzkreig convinced the Reichsbank, like many others, that the fighting would soon be over. The central bank and the Reich economics Ministry, under Goering, actively laid plans for post-war monetary union across a large part of Europe with the Reich mark as the dominant currency. In June 1940 the Reichsbank economics and statistics department prepared a detailed analysis for Funk and the rest of the directorate, looking ahead to problems for external monetary policy after the end of the war…In fact, by July 1940, the Reich economics Ministry had already drawn up detailed plans for a bank of European settlements, to be called the Bank of Europe, as the pivot of the planned post-war monetary system. Countries eligible for participation in the proposed central European economic union included the Netherlands, Denmark, Slovakia, Romania, Bulgaria and Hungary. The Reich economics Ministry suggested that Belgium, Norway and Sweden could also become associated. Special arrangements would have to be made in a future peace treaty with Britain and France in order to secure the economic recovery of central Europe.

Photo of Peter Tapsell Peter Tapsell , Linsey East

Exactly.

David Marsh's book continues: Initial plans were thus based on individual countries' maintaining their own currencies but agreeing to permanently fixed exchange rates against the Reichsmark. That is the ERM. It has all happened before.

I should like now to turn to the question of who first established an independent and unaccountable central bank. It was not, as many people think, Bismarck in 1870. On the contrary, Bismarck took the view that bankers should not be entrusted with political power, that they would always produce mass unemployment. He made sure, when he set up the Reichsbank in 1870, that it was totally subject to political control—not very democratic political control, but his control.

In 1923—just after Germany, for the first time ever, became a democracy in the shape of the Weimar republic—a gentleman called Dr. Schacht decided that it would not be a good thing for the Reichsbank to be subject to democratically elected politicians. He managed to persuade the Weimar republic in 1923 to set up an independent and unaccountable Reichsbank—the predecessor of the Bundesbank.

Of course, some of our fellow countrymen share Dr. Schacht's distrust of elected politicians. I am afraid that there are many such people in the City of London and in the boardrooms of British industry, as the Chancellor of the Exchequer will discover when he looks for a commercial job. Many people do not admire politicians. It is worth recalling that, when Hitler was elected to power in 1933, the already independent and unaccountable Reichsbank, far from proving a bulwark against irresponsible political adventurism—one of the arguments is that unaccountability and independence provide a barrier against political adventurism—immediately became, under Dr. Schacht's presidency, a slavish and most helpful tool of Nazi tyranny.

Photo of Mr Stephen Milligan Mr Stephen Milligan , Eastleigh

My hon. Friend's account of the origins of European monetary union is most entertaining, but it is, surely, completely inaccurate. The first European monetary union, which was not a theory, but happened and went beyond Europe, was the creation of the gold standard.

Photo of Peter Tapsell Peter Tapsell , Linsey East

That was not confined to Europe. The gold standard had one great merit: sterling was the anchor currency. If one's currency happens to be the anchor currency, marvellous ideas for monetary union based upon it become quite attractive. The sterling area was attractive when we were the anchor currency; the Bretton Wood agreement was attractive to the United States while the dollar was the anchor currency—although President Nixon left the agreement pretty smartly in 1971 when he found that the dollar was no longer the anchor currency. We would not be the anchor currency in a European monetary union: the Bundesbank and the German mark would provide the anchor currency. Our interests would be subordinated to German interests, as they were while we were members of the exchange rate mechanism.

Photo of John Butterfill John Butterfill , Bournemouth West

My hon. Friend said that the German mark would be the anchor currency if there were monetary union. But under the proposals in the treaty, the German mark would fall. If it no longer existed as a currency, how could it become the anchor currency?

Photo of Peter Tapsell Peter Tapsell , Linsey East

As I said earlier, if we had a single currency, whether we called it the ecu or anything else, it would be the deutschmark under a different name, because Germany is the dominant economy. It is precisely because people admire the way in which the Bundesbank has run its monetary affairs in recent years that they want a European central bank. They think that that bank will be modelled on, and undoubtedly dominated by, the Bundesbank.

The Reichsbank was unaccountable and showed no independence. It did not seek to emulate the Fed in the United States of America, which caused so much trouble to Franklin D. Roosevelt in his first years. By contrast, the Reichsbank overnight became Hitler's creature and provided him with the sinews of war.

People should not be under the illusion that an unaccountable central bank will show a degree of political independence, integrity and liberalism when faced with ruthless and corrupt politicians. History does not suggest that. Far from being a source of weakness to great institutions, their accountability to democratically elected bodies elsewhere is ultimately an essential source of strength to those institutions and those who lead them. Under the Maastricht treaty, no effective accountability will exist—or could exist—as the Financial Secretary recognised in his reply to me on 14 January, which I have already quoted.

Until now, I have made largely economic and banking comments, but I shall now draw some political conclusions. With the loss of ultimate parliamentary control over the central bank, the House will lose the rock on which it was founded and built: control over the money supply. Our constituents will effectively be disfranchised. Those hon. Members who vote for article 107, and its related articles and protocols, will effectively be echoing Cromwell's words when he pointed at the Mace and said, "Take that bauble away."

When I first entered the House, 34 years ago, there were still a considerable number of hon. Members, particularly Conservative Members, who had sat in the Chamber throughout all the debates on Neville Chamberlain's appeasement policies. I never spoke to one such Member who could recall in his heart ever having been a supporter of those policies. I sometimes used to wonder whether the Munich agreement had been carried single-handed by Neville Chamberlain and the Conservative Whips Office.

Before I entered the House, when I was personal assistant to Anthony Eden, the then Prime Minister, Walter Elliot—a distinguished Member of the House who had been here in the 1930s and who voted for the Munich agreement—told me in a private conversation, which I feel able to repeat as he has been dead for many years, that he voted in favour of Munich out of a sense of personal loyalty to Neville Chamberlain. He said that he admired Chamberlain as a man, and felt that he had done a good job domestically. Walter Elliot said that voting for Munich had not only eventually wrecked his own political career but, more importantly, had damaged his self-esteem. He said that he had never ceased to reproach himself for that vote as events unfolded.

I ask my younger hon. Friends, who have not been long in the House, have long careers ahead of them and know in their hearts that the Maastricht treaty is not right for Britain, to remember Walter Elliot. I predict that, 10 years from now, there will be very few Tory Members of Parliament who will easily recall that they were ever supporters of the Maastricht treaty.

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

We have listened to a speech of exceptional interest from an hon. Gentleman who knows the banking world very well. The account of the hon. Member for East Lindsey (Sir P. Tapsell) of the history of banking, and the relationship of the Bundesbank and the Fed to their Governments, and of the Bank of England to the British Government, merits an enormous amount of study.

I wish that the press were not honouring our debates by their absence. But the newspapers are part of the Greek chorus to which the hon. Gentleman referred at the end of his speech. It is generally assumed by everyone that the Maastricht treaty will be passed, so our debates are a complete waste of time. I find myself in a weird position, as my Front-Bench colleagues are passionately pro-Maastricht. All that has ever been attempted by the Opposition are little procedural tricks to embarrass the Government on a closure motion or something of that sort. We hear no criticism of substance from the Labour Front-Bench team of the Maastricht treaty.

People outside the House are not foolish and they know what is going on. They know of the great cheering when we succeed in voting to go home at 10 pm—but our activities have no substantive effect. The Conservative and Liberal Front Benches are together on the treaty and those of us who hold a different view are publicly presented as a little group of old-fashioned fuddy-duddies who would like to live in the past.

The reality is that the central bank is at the core of the political question that we are discussing. We are not really discussing economics, although I appreciate that that issue has considerable implications. We are discussing where political power will rest, because the bank will have the ultimate right to determine the shape of the budget, which determines the amount of public expenditure allowed.

Nobody has mentioned the fact that the central bank will wipe out the social chapter. If a Labour Government who favoured the social chapter were elected and wanted to spend more money—they might even wish to adopt the social chapter—the central bank would say no. It would say that, if to do so meant borrowing more than 3 per cent. of the gross national product, the Government would not be allowed to do it—there is a self-cancelling element.

The role of 3 per cent. is an interesting one. I recall the publication of the Beveridge report when I was a student about 50 years ago. It set 3 per cent. as the maximum tolerable level of unemployment. We are now moving towards monetarist days when 3 per cent. is to be the maximum public borrowing, which will condemn us to high unemployment levels for ever.

The importance of the debate is that all the Front Bench teams agree. All the parties represented in the House are abandoning their separate traditions. I cannot speak with authority on the basis of Conservative thinking over the years, nor would I wish to do so. My understanding was that it was about a Britain strong and free. That was the title of a Conservative election manifesto which I have a home in my archives. It shows a picture of a great lion in Trafalgar square and it has the slogan "Britain strong and free". It is a Britain weak and governed by a central bank which is on the agenda now.

7.30 pm

Hon. Members may persuade the electorate or the BBC or John Birt by some special financial arrangement that it is about something else, but they should not try to kid people who have been here long enough to know otherwise. If the Chancellor of the Exchequer were committing an offence if he tried to influence the central bank, which is what the treaty says, how can that possibly be the maintenance of an independent nation?

I am not a nationalist. My history does not lead me to the view that a strong pound and, as somebody said about nuclear weapons, the best-defended dole queues in the world, are the main national duties. However, I have interpreted the Conservative party to take that view and it has been completely undermined by Maastricht.

The Liberal party used to believe in free trade: that is what it was all about. My father was elected as a Liberal Member of Parliament in 1906, but sensibly joined the Labour party in the 1920s just after I was born. It took me a year or two to persuade him to make the transfer and he joined the Labour party in 1927. Now the Liberal party is voting for the most highly protected arrangement one could imagine. It has abandoned its faith.

I now come to my own party. However difficult it is for me to do so, I share the view of the hon. Member for East Lindsey about the importance of history, because, if we do not know where we have come from, we do not know where we are and are therefore not quite sure where to go. My reading of what I would call the progressive political tradition in Britain is that it was the ordinary common people who had no vote but wanted one so that they could use it to influence the conditions of life under which they lived. Through the ballot box they could elect a Government who would at least act as a countervailing power to the power of the landowners and capital.

That has been wholly and completely abandoned by the Front Bench spokesman of my party. It is not that socialism has been abandoned, because that went years ago. My hon. Friend the Member for Blackburn (Mr. Straw) says that we should abandon clause 4. I am waiting for him to say that the archbishop should abandon the 10 commandments on the ground that adultery is so widespread that one could not hope to build a Church on the basis of excluding it.

However, that is not the issue. The issue is that, 100 years ago, when Keir Hardie was elected to Parliament, the principle upon which he built his support was that it was possible for people who did not own banks or have personal wealth to band together into trade unions and promote a party that would use the ballot box to contain, control and redirect the power of capital.

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

Perhaps the hon. Gentleman would allow me to finish. I am trying to develop a theoretical argument that needs to be considered and I hope that I am not being provocative. Labour's Front-Bench Members are abandoning their belief in democracy.

Photo of Mr Peter Mandelson Mr Peter Mandelson , Hartlepool

Will my right hon. Friend give way?

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

No, I intend to develop this point. My hon. Friend will have plenty of opportunities for sound bites. I am putting an argument.

Photo of Mr Peter Mandelson Mr Peter Mandelson , Hartlepool

My right hon. Friend has referred to me. Will he give way?

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

No, I shall not give way.

I am putting a serious argument which I feel deeply. It is that the ballot box is important because it does what I have described in many ways. When a Liberal Government repealed the Taff Vale judgment and allowed trade unions to play a role that the previous Conservative Government had prohibited, they were legislating for a countervailing power against capital. That was greatly to their credit. In many respects the Liberal Government of 1906 were far more progressive than my party today because they carried through much more radical taxation changes and legislated for public ownership of the London docks.

People may agree or disagree with what has been done during this century, but its history shows that trade unionism with a political voice gave people power over their economy which they did not have when they did not have the vote. That was why people wanted the vote. The chartists and the suffragettes were not trying to obtain an A-level in English history or English government. Women wanted power so that Parliament would have to listen and pay attention to women's interests, and those interests were reflected in a minimum wage, in Sunday shopping regulations and in other ways. I fear that that is what my party has abandoned.

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

My hon. Friend who is trying to intervene asked what hope Britain had of dealing with unemployment. He said it with deep pessimism. My complaint is not that there is a viciousness in Labour Front-Bench Members, but that there is a deep and absolutely unnecessary pessimism. I am on the national executive of the party and I am not trying to be controversial but simply putting a point of view. The party of which I am a member now believes that nothing at all can be done about unemployment because of the power of international capital. I dispute that, because, if it is difficult now, it was difficult for Keir Hardie.

Photo of Andrew Smith Andrew Smith Shadow Spokesperson (Treasury)

My right hon. Friend has described the history of democratic socialism as the attempt by people to gain control of the economic forces that shape their lives. Now that capital and the economic system are clearly organised on a European basis, does not that mean that if we are to exercise democratic power in the interests of working people we must do it in conjunction with our European neighbours? As our conference resolutions and policies make clear, the European Community and the Maastricht treaty are the best available means to do that.

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

That is the core of the argument. In its manifesto last March the Labour party endorsed the Maastricht treaty even though it had not been negotiated at the time of the previous conference. There was no conference legitimacy for the manifesto. I said in Chesterfield that I was opposed to it. We are not arguing about nationalism versus internationalism: we are on a wholly different issue. International capital is not controlled by handing it over to the archbishop and bishops of international capital—the independent central bankers.

Listening to my hon. Friends on the Front Bench and my other passionate, modernising colleagues is like listening to the maharajahs at the time of the Raj in India who said, "Look, Queen Victoria is here. You must live with her and you will have more influence if you pick up a knighthood from Buckingham palace and go to the coronation than if you follow this silly Nehru-Gandhi stunt of trying to run our own land."

Photo of Clive Betts Clive Betts , Sheffield, Attercliffe

I am still trying to discover my right hon. Friend's realistic alternative in the current situation. He seems to be arguing that we should not be pursuing economic and monetary union as described in the treaty and that we should opt out of our arrangements with the Community. He seems to say that the alternative is simply to retain parliamentary sovereignty and ignore our arrangements with our colleague countries in the Community and that by doing so we can deliver for our people full employment and all the other benefits that he and I want to see. Are those realistic alternatives?

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

My hon. Friend with his clarity of mind has confirmed his pessimism. He had distinguished service on Sheffield city council and honestly believes that Sheffield can do nothing within the context of Britain and that Britain can do nothing outside the context of the Maastricht arrangement. No one should think that Maastricht will liberate us from world market forces because the ecu could go up and down according to the gambling that might occur with the yen and the dollar. I challenge my hon. Friend's pessimism.

If I accepted it I would never stand for Parliament again because I would have to go to the people of Chesterfield, as I shall have to do if this goes through, and say, "You can vote for whoever you like, but I must tell you honestly and frankly that if you vote for me I cannot do a thing about improving the prospects here because my party has agreed to hand over all the powers not to Parliament but to an independent European bank."

Photo of Mr Nigel Forman Mr Nigel Forman , Carshalton and Wallington

The right hon. Gentleman's essential thesis seems to be that power in the modern world emerges, as at the time of Keir Hardie, from the vaults of a bank. In this case, he talks about the power of a possible European central bank. The right hon. Gentleman argues that countervailing political power is needed to lean against that. Does he not realise the impeccable logic of the French case, which is that a political counterbalance is needed against the emerging system of a European central bank and that that should be achieved within the framework of the arrangements proposed by the French to bind the Germans and everyone else?

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

The French socialist party has destroyed itself by following the policy advocated by members of my Front Bench. It has absolutely obliterated itself—although temporarily, not in the longer term.

I was at first against the European Community and wrote an article in Encounter to that effect in 1964. Then, some of the pessimism that I described today overcame me in the 1964 Labour Government. I thought, "This is the way to deal with multinational capital," and favoured our application. Later, I served in the Community, as a member of the Council of Ministers. I came to realise that the European Community is the instrument of multinational capital, to ensure that there is no democratic challenge to the power of international capital. Those who live under the illusion that Brussels and the bankers are our friends against multinational and international financiers are living in a complete dream world.

This may be controversial, but I am bound to say that, for the moment, many of my hon. Friends think that capital should be free to move wherever it likes. They agree that labour should be constrained. Consider the control over labour that exists in Britain compared with the freedom of capital.

This might not appeal to Conservative Members—or they may like it. Paul Johnson has an article in The Daily Mail today saying that the police and the Government have enough firepower to gun down Scargill, Bickerstaffe, and so on, if there is trouble on 2 April. Compare the £10 billion made by speculators on the day that we left the ERM with the fines and sequestration imposed on trade unions if they interfere with production for one day without balloting. That is something that my hon. Friends endorse, too, because it is part of the system that labour should be constrained and capital liberated. Then we tell the populace, "Don't worry—Brussels is the means by which we can control international capital." That is not at all true.

I am trying to chronicle as best I can the nature of the decision that I fear that the House will take. I favoured a referendum in 1968 and still do. The Labour party was not very keen. I was in a minority of one on its national executive and shadow Cabinet, but Wilson came round in the end and we had a referendum. I dare say that, in one way or another, the Conservative party will come around to a referendum, too. But members of my Front Bench are also opposed to a referendum. They do not want the people to have a say. They are absolutely solid in joining the Government in denying the people the right to have the sort of fascinating, important, historic and fundamental debate that we are allowed tonight.

If the House voted by secret ballot on the Maastricht treaty, it would be defeated, because it would not be known to whom to deny a peerage, put on the Front Bench, allow to attend royal garden parties at Buckingham palace, or reward by the corrupt patronage system—even as revamped by the Prime Minister.

Photo of Miss Janet Fookes Miss Janet Fookes , Plymouth Drake

Order. How does that relate to the amendment under consideration?

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

I will say, as a right hon. or hon. Member always does when called to order, that that was a very helpful point to make, Dame Janet.

This huge issue wipes out centuries of Conservative and Labour tradition—the Conservatives defending the national interests of the nation—I am not a nationalist—and Labour defining the power of the ballot box to change our destiny.

7.45 pm

The consequence will be riot. As I suppose that we will lose the vote on Third Reading, I will prepare myself for the next stage. All that will happen is that I shall be catapulted back 100 years, to a Parliament that is not democratic and a time in which women do not have the vote. How does one live in a 19th-century Parliament, in an era when riot is used to change the law? French farmers and French fishermen are rioting already and some British fishermen are beginning to get the message that, if they want to catch the really big fish in the form of the Cabinet, they had better riot. That will happen because people will not accept unjust laws.

If I cannot influence the outcome of the vote on Third Reading—and I am realistic enough to accept that I cannot—I am determined to leave in Hansard an explanation of what happened and why. Pessimism, defeatism, and the failure to represent the people whom we were elected to serve is what happened. If I were not such a moderate man, I would call it a massive betrayal by Parliament of the people who put us here, but I do not know that I want to use the word "betrayal", because it is more a collapse of our self-confidence.

How is history to be made other than by people who have confidence in their own society and institutions and in their capacity to advance them? The so-called modernisers in the Labour party are taking us back to Victorian England. They are not modernisers but Victorian liberals. They believe in market forces and the Manchester school of economics. They do not like the unions very much. They do not believe in socialism. They want the ins and outs of the Tory-Liberal game of the 19th century—well before the Labour party was founded. That cannot be done, because the circumstances of our time will not allow it.

We have chronic mass unemployment and chronic mass youth unemployment, and people will not accept that. I do not know when the expression of anger will come. It may come on 2 April, with unexpected events. Something quite surprising could trigger it off—but if, when that anger comes, it cannot effectively be represented through the Labour party in Parliament, people will find other ways of expressing it. I fear that because I believe in this place. I may be an idealist even to believe in Parliament, but when I was elected I was told that the great thing about Parliament was that it controlled the purse and the sword. That was the great 17th-century gain, but today we do not control the purse.

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

The right hon. Gentleman spoke of lack of confidence in ourselves. Is not there some inconsistency in his argument in respect of a referendum? Would not a referendum be the ultimate proof of lack of confidence in this place?

The Second Deputy Chairman:

Before the right hon. Gentleman continues, I remind him that the amendments under consideration concern banking. The right hon. Gentleman is, in effect, making a Second Reading speech, if not one that goes wider.

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

If banking lies at the heart of the treaty—as it does—you, Dame Janet, will forgive me for drawing attention to its importance.

The Prime Minister supports Boris Yeltsin's referendum, but not a referendum for us. There must be some logic. These big questions are not being considered under parliamentary democracy but are being dealt with under the discipline of the Whips on both sides of the Committee, using all sorts of weapons at their disposal. These questions are not being decided on a free vote of Parliament. At my age that does not affect me, because I do not want anything. They cannot do much to me if I want to speak my mind—but it is disrespectful to the people who put us here to take away the power they lent us and to give it to bankers whom they cannot remove. That is the argument in a nutshell.

I hope that the public have the chance of reading something of the speech of the hon. Member for East Lindsey and of this debate, to understand the enormity of what is being done here and the unanimous betrayal of all the traditions of the three parties by following this route.

Photo of John Butterfill John Butterfill , Bournemouth West

I have the somewhat unenviable task of following two extraordinarily eloquent speakers—the right hon. Member for Chesterfield (Mr. Benn), who is probably the most eloquent and entertaining speaker left in the House, and my hon. Friend the Member for East Lindsey (Sir P. Tapsell), whose expertise in banking matters is probably unrivalled in the House of Commons. The position in which I find myself is especially unenviable, for I disagree with much of what both of them have said.

I am grateful to my hon. Friend the Member for East Lindsey for explaining in such detail the constraints, and the checks and balances that exist in regard to the Bundesbank and the Federal Reserve Board. My hon. Friend carefully explained that the Federal Reserve Board is accountable to Congress. He also pointed out that it did not control the bank's day-to-day monetary decisions. That was an important clarification, but—perhaps even more importantly—he made it clear that even the Federal Reserve Board, with its renowned independence of view, was subject to pressure from the executive: not from Congress, but from the presidency. That, surely, is rather extraordinary. No one suggests that the President has any authority over the bank, and, indeed, it is not accountable to the executive; it is accountable to Congress.

Photo of Peter Tapsell Peter Tapsell , Linsey East

First, I said that the Federal Reserve Board was subject to pressure from both Congress and the President. Secondly, given that the President appoints the board's governors when vacancies occur, he cannot be sand to have no influence.

Photo of John Butterfill John Butterfill , Bournemouth West

I am grateful for my hon. Friend's helpful intervention. I was not suggesting that the President had no influence; I was suggesting that the board was not accountable to him. Of course, influence is exerted in all these matters—and whoever appoints a central banker, under whatever system, will naturally have influence as a result of his power to appoint. However, it was the accountability point that my hon. Friend was addressing.

Similarly, my hon. Friend explained the independence of the Bundesbank and the element of accountability in that system, but went on to concede that, in the face of the political realities dictated by the unification of Germany, the political will of the people eventually prevailed over the wishes of the Bundesbank, which was forced reluctantly to allow a one-for-one parity between the deutschmark and the ostmark—for which the German people and, indeed, the rest of Europe have subsequently had to pay a considerable price.

Photo of Peter Tapsell Peter Tapsell , Linsey East

I was trying to make the point that the Bundesbank is specifically excluded from interfering with the exchange rate. Chancellor Kohl was entirely within his constitutional rights in making his decision about the parity between the ostmark and the deutschmark. President Pöhl could only give his advice in private: the Bundesbank has no constitutional control over the exchange rate.

Photo of John Butterfill John Butterfill , Bournemouth West

Again, I am grateful to my hon. Friend. He will know that the subsequent conduct of monetary policy has been the subject of considerable tension between the Government and the Bundesbank, and that great pressure has been put on the bank, to some of which it has yielded. My hon. Friend's suggestion that independent central banks cannot be politically accountable is not borne out by the facts. Clearly, whatever system is set up to try to give such banks independence, they will all ultimately be susceptible to political pressures from whichever political institution happens to be in place. I believe that the same would apply to a European central bank, although the pressures would come from a different quarter.

Even today, with our new-found freedom conferred by a floating currency, we see in the newspapers questions such as, "Will the Germans reduce their discount rate, and will that enable our Chancellor to reduce our interest rates still further?" It is not true to say that we retain true independence of action; even with that new-found freedom, we are still bound by our relationships with other currencies. Given that Germany is our largest single trading partner, it is clear that we are very much bound up with what happens in Germany, and very much influenced by the power of the deutschmark.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

Surely my hon. Friend recalls the events of last summer, when our Government consistently told us that, if we left the exchange rate mechanism, our interest rate must inevitably rise. What happened? The day after black Wednesday, interest rates went down. How can my hon. Friend possibly maintain his theory in the light of those real and practical events?

Photo of Ian Taylor Ian Taylor , Esher

The exchange rate went down as well.

Photo of John Butterfill John Butterfill , Bournemouth West

I was intending to turn shortly to the events referred to by my hon. Friend the Member for Ludlow (Mr. Gill), but I agree with the sedentary observation made by my hon. Friend the Member for Esher (Mr. Taylor).

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

What was wrong with that?

Photo of John Butterfill John Butterfill , Bournemouth West

I am not suggesting that anything was wrong with it.

Photo of David Winnick David Winnick , Walsall North

Will the hon. Gentleman give way?

Photo of John Butterfill John Butterfill , Bournemouth West

May I answer my hon. Friend the Member for Ludlow first? If I give way too often, I may become rather confused about which question I am answering, and where I have got to in my speech. I shall try not to be waylaid too frequently.

We made a political decision to reduce the exchange rate, and we took a gamble on the effect that that might have on inflation. Given that we were in a considerable recession, that appears to have been a wise decision. My point is that, although our currency is notionally free and floating, we are still influenced by what happens in Germany, and must inevitably continue to be influenced by our trading relations.

Photo of David Winnick David Winnick , Walsall North

No one is suggesting for a moment that we can act in total isolation from other currencies; that has never been part of the argument. Does the hon. Gentleman accept, however, that part of the argument that he and others are advancing about the ratification of the treaty and the European central bank is very similar to the argument of those who were so keen for Britain to join the ERM—which, indeed, was the conventional wisdom of the time? It was said then that we could not act in isolation, that joining was inevitable and that those who opposed it—as I certainly did—were living in the past. Yet our ERM membership was a disaster, which cost a great deal in British manufacturing jobs. It is now recognised that at least part of the reason for our high unemployment rate was our ERM membership. Thank heaven we are now out of it.

Photo of John Butterfill John Butterfill , Bournemouth West

I had hoped to deal with the hon. Gentleman's argument later. He is right to say that the ERM was profoundly damaging to us, as it was constituted when we were part of it. What was damaging about it was that the Germany Government were reluctant to fund the unification costs through taxation—although they briefly tried to introduce a 7·5 per cent. special levy, which proved politically unacceptable. They lost a good many seats in the Lander elections as a result. Under the German system, which imposes on the Bundesbank a statutory duty to prevent inflation, the only alternative to funding that enormous level of expenditure was to increase interest rates. That is what went wrong.

Photo of John Butterfill John Butterfill , Bournemouth West

I should like to get on, if I may.

I do not think that any of us anticipated the events that would arise out of the unification of Germany. Indeed, I do not think that many hon. Members anticipated the unification itself, still less the strains that it would impose on the economy.

Photo of John Butterfill John Butterfill , Bournemouth West

I must develop my argument. I have given way several times. The hon. Gentleman will have the opportunity to make his own speech if he can catch your eye later, Dame Janet.

The statutory duty of the Bundesbank to increase interest rates and to have regard only to what is happening in the German domestic economy caused the strains within the exchange rate mechanism and was the fatal flaw within that mechanism. It produced fundamental instability in a system designed to promote stability. We shall achieve stability only if, within a future exchange rate mechanism, the participating central banks have a duty to support the operation of that mechanism rather than a narrow duty to look after their own national interests. That has not yet been fully recognised, but I believe that it is an essential prerequisite to the successful operation of a mechanism.

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Indeed, the very weakness of the mechanism reveals the need either to have a system of freely floating currencies, which we have now, and which will be influenced by a dominant currency—as my hon. Friend the Member for East Lindsey said, it would be dominated by the deutschmark—or to merge all the currencies into a single currency, which would overcome my hon. Friend's fear.

Under the proposed system, the Bundesbank would represent but one equal vote in the operation of a central bank and would to a large extent be giving up its control of what happens in the European economy. That is recognised in Germany where there is now considerable resistance in many quarters to the very idea of giving up the power that it has through the present operations of the market. It therefore seems that we have a great deal to gain, and certainly nothing to fear from German domination, under the system proposed in the treaty.

Indeed, if we were to move quickly to currency union, we should all gain a great deal more influence over our own affairs than we have at the moment. However, I do not think that that utopia will come about for a considerable time, because the convergence criteria are not likely to be achieved in anything like the forseeable future. I do not agree with the proposal that the price that we should all have to pay should be to have cohesion funds to transfer huge sums of money from the wealthier northern countries of Europe to the supplicants in the south. The suggestion that that would be politically acceptable to the countries of the north is pie in the sky. It does not happen even in federal states such as the United States of America, where there is only a limited transfer from the wealthier to the poorer states.

Photo of Mr Barry Legg Mr Barry Legg , Milton Keynes South West

Does my right hon. Friend realise that, when there is an independent European central bank, there will be one interest rate for the whole of Europe? Germany, Italy, Spain and the United Kingdom will have one interest rate. There will be no question of having easier monetary conditions in one part of Europe than in another. Within that system, the only way to mitigate the inequalities and problems that will arise will be through massive transfers of funds across Europe.

Photo of John Butterfill John Butterfill , Bournemouth West

I am very surprised to hear that argument from a Conservative Member. We have seen what has happened under our own regional policy. In the United Kingdom, where, my hon. Friend may be surprised to know, we have a monetary union, we have tried to deal with the problems of having some poor and some rich regions by pouring money into the poorer ones, which is what the Labour party has advocated for years. The effect has not been to improve the lot of the poorer regions. In fact, the lot of the poorer regions has improved only when they have had the wit to abandon some of the restrictive practices imposed by trade unions, to embrace free markets and to encourage inward investment. It is the encouragement of inward investment into the poorer parts of the Community which will ultimately be their salvation. Therefore, we have nothing to fear from a system that brings a single interest rate, combined with a single currency, throughout the European Community. However, we shall take a considerable time to get there.

Photo of Roger Berry Roger Berry , Kingswood

The previous contribution was extremely interesting. If the hon. Member for Bournemouth, West (Mr. Butterfill) had given way, I would have asked him to consider the scale of transfers within this country and this monetary union. Many of us consider them to be inadequate, but they take place automatically between regions when unemployment is higher in one part of the country than in another. The scale of those transfers is inadequate, but it far exceeds anything planned under the Maastricht treaty as part of the movement to a single currency and to monetary union. I shall say more about that a little later.

The vast majority of amendments in this group, including the modest amendment No. 101 tabled by my hon. Friend the Member for Neath (Mr. Hain) and me, are clearly critical of economic and monetary union, as is amendment No. 36, which I strongly support. One of the interesting features of the Maastricht treaty has been pointed out by the hon. Member for East Lindsey (Sir P. Tapsell). The essence of the treaty is economic and monetary union. About a quarter of the treaty's pages relate to banking arrangements and monetary policies. It is interesting to note that the treaty contains very little reference to other aspects of economic policy but that a quarter of the treaty—its guts and its specific proposals—relate to banking arrangements and monetary policy.

There is little doubt that hon. Members such as myself, who have not yet spoken in the debate, must state whether we are Euro-sceptics or anti-European. For the record, I am not a Euro-sceptic or anti-European. I am strongly pro-European. I am so pro-European that I do not want to support a treaty which will impose monetarism, deflation and unemployment on other members of the European Community, as it would here. There is little doubt that the treaty is a victory for those who believe that economic policy is essentially monetary policy and that the achievement of price stability—zero inflation—is the only worthwhile objective of macro-economic policy.

The view is staggeringly irrelevant, given the enormity of the recession and the unemployment facing the European Community. However, monetary policy as the instrument, and price stability or zero inflation as the objective, seem to be the sum total of economic policy in the treaty. It is a view promoted by bankers, among others, who tell us that it is best to take monetary policy out of democratic control and to put it in their good care.

As for democratic control, I cannot help but remember the enthusiasm that many had for democratising the composition of the Committee of the Regions. It is an advisory body, but it was nevertheless apparently a great victory for democracy when the Government were told in no uncertain terms that they must appoint to it representatives of local communities. That was a great victory for democracy, and I should like a similar victory for democracy when we come to deal with the European central bank or similar institutions.

As for the the "good care" of bankers, I find it surprising that anyone should be convinced by the argument that we should hand them more powers. I could be wrong, but I thought that bankers had something to do with the third world debt crisis because they pursued ill-informed and exceedingly ill-judged lending policies. I could be wrong, but I thought that they had something to do with the disastrous financial deregulation in the 1980s, which led to a wholly unsustainable credit boom and the debt problems that we now face. I am pretty certain that it is also bankers who, with some others, get into hysterics about the extent of public sector borrowing, yet enjoy every little bit of interest that they can get from the much more serious problem of private sector debt. Private sector debt is okay, because bankers do all right out of it.

In fairness, I must add that my opposition to the European system of central bank proposals in the Maastricht treaty is based, not simply on the fact that the bankers support them, but on my genuine belief that economic and monetary union will have the biggest impact of any of the proposals in the treaty, and will inflict serious damage on the economies of Europe.

The proposals are also exceedingly outdated. I find it strange that some people present them as modern when they are based on ideas that became fashionable in certain quarters in the 1980s. It is true that the Delors report was not the first document to promote monetary union within Europe but, if I may be forgiven for not going as far back as some other hon. Members have done, I remind the Committee that in the 1980s, both before and during the debates on the Delors report, the orthodoxy was that we should go for an independent monetary policy aimed exclusively at price stability. That is an old-fashioned idea, extremely inappropriate for Europe in the 1990s, let alone beyond.

My opposition to that part of the treaty is based on the fact that the proposals are confused, monetarist, deflationary and undemocratic. I shall say a few brief words about each of those characteristics, starting with the confusion. It is true that other treaties have confused institutional arrangements for arriving at economic policy with the policy itself. Many treaties, including the treaty of Rome, could be said to have done that. But in the Maastricht treaty there is a hopeless confusion between the institutional framework for setting monetary and fiscal policy—the European system of central banks, the European Monetary Institute, the European central bank, and so forth—and a particular approach to monetary and fiscal policy—the policy to be pursued by the central bank, the convergence conditions, and so forth.

If we wish to establish a set of institutional arrangements for the conduct of economic policy in Europe, they should be robust enough to accommodate policy change. But in Maastricht, we have a mixture, a mess and a confusion between a set of institutions designed to arrive at an economic policy, and a particular economic policy. There has been an accommodation between the Euro-federalists, who have got the kind of institutions they quite fancied, and the monetarists, who have got the economic policy that they wanted.

Such confusion is hopeless when it comes to making treaties. Institutions should be able to accommodate changes in policy—unless, of course, the purpose was that we should never change our economic policy. Perhaps the idea was that we would agree the treaty and that would be the end of policy making. In policy terms, that is alarming, because Maastricht reflects an obsession with inflation and—more importantly—an indifference to unemployment that were inappropriate even in the 1980s, and are grotesque in the 1990s.

The objective of the European system of central banks has not been referred to in the debate, although it has been referred to previously. It is essential to repeat it in order to understand the concerns behind the amendments. Article 105 clearly sets out that objective: The primary objective of the ESCB shall be to maintain price stability. Price stability means zero inflation. Of course the European central banks should support the general economic policies set out in article 2—we have heard that often enough—but those policies are not seriously referred to anywhere else in the treaty, so they will not cause too much of a problem. Article 105 says that the ESCB should refer to the general policies in article 2, but that it should do so Without prejudice to the objective of price stability". 8.15 pm

The objective is clear. We have an independent central bank which is to be established with the legal requirement that its overriding objective should be zero inflation. None of that is accidental. The intellectual roots of the programme are monetarist—the Delors report and before. The pathological obsession with budget deficits and the money supply that is evident throughout Maastricht is based on two monetarist dogmas. The first is that the proper control of the money supply will eliminate inflation, and that that can happen without any harmful effects on unemployment, growth or the real economy.

The second crucial monetarist dogma is that unemployment and growth are determined entirely by supply side conditions, so demand management can be relegated as if it had no importance, or at least only secondary importance. That is not only nonsense but dangerous nonsense. It is why price stability is the overriding objective for the European central bank, and why we are to have an independent central bank with the constitutional requirement to pursue price stability at all costs.

The monetarism is self-evident, and it should be a cause for concern not only among the Opposition. Even the Government no longer accept monetarism—

Photo of Roger Berry Roger Berry , Kingswood

I shall finish my point, and then give way.

The Chancellor of the Exchequer is desperate to use monetary policy to engineer a consumer-led boom, desperate to use interest rates to encourage consumers to spend more so as to steer the economy out of recession. He no longer believes that zero inflation is a sensible objective, nor does his practice suggest that he still believes that monetary policy should be handed over to somebody else.

Photo of Mr Stuart Randall Mr Stuart Randall , Kingston upon Hull West

I have listened carefully to what my hon. Friend has said about maintaining price stability, but I am worried about the way in which he has written off article 2 by saying that it has been mentioned only once and that it therefore loses its validity. I am sure that that is not terribly logical.

Photo of Roger Berry Roger Berry , Kingswood

I am not conscious of having said that article 2 had been mentioned only once; it has been mentioned many times in the debate. Article 2 is made much of in connection with the European central bank in an attempt to support the proposition that such a bank would be about more than aiming at zero inflation—a rather stupid objective—because the article refers to employment, growth and so on. But although article 2 mentions employment and growth, the rest of the treaty does not. The treaty places on the European central bank and the other monetary institutions the requirement to pursue zero inflation, but there is no corresponding obligation to pursue policies that deal with the real economy. That is the relevance of what I was saying.

Photo of Mr Peter Shore Mr Peter Shore , Bethnal Green and Stepney

We have heard a lot about article 2, and it is nonsense to give it the elevated importance afforded it by my hon. Friend the Member for Kingston upon Hull, West (Mr. Randall). If the other parts of that article, including the commitment to a high level of employment, were basic to the treaty, there would be a protocol on the subject, and all kinds of elaboration—measures to be taken and commitments made. There are no such commitments, and that is why the balance of what my hon. Friend the Member for Kingston upon Hull, West said to my hon. Friend the Member for Kingswood (Dr. Berry) is wrong.

Photo of Roger Berry Roger Berry , Kingswood

I agree with my right hon. Friend. If one accepts the monetarist position, one can have no objection to those provisions in the Maastricht treaty. Of course one could have no objection to aiming for price stability, because one would believe that it did not affect unemployment or growth. One could not object to setting up an independent central bank beyond anyone else's control, with the specific requirement to achieve price stability, because that would not affect the real economy, so there would be no problem.

To a hard-line monetarist, there is, of course, no difficulty with the proposals, but unfortunately for those who support the Maastricht treaty, no one believes that nonsense any longer—not even the present Government. As has already been said, in a few years' time, our debates may well be judged to have been about a set of proposals that were so unsustainable politically, so unrealistic and so devoid of any recognition of how the real economy works that they will never be implemented. Unfortunately, however, they are the proposals that we have an obligation to debate today.

The monetarist agenda is deflationary, simply because any fool can get zero inflation by hammering the real economy, pushing up unemployment, restraining growth and creating recession. It has been done many times and no doubt it will happen again if certain people have their way. Maastricht is deflationary in other respects, too.

I shall not refer—because it would be out of order, Dame Janet—to the convergence criteria in stages 2 and 3, to which we shall return later, but the whole question of a single currency and monetary union is worthy of attention. I recognise that a single currency has benefits.

Photo of Roger Berry Roger Berry , Kingswood

I recognise that—and not for the first time, as my hon. Friend the Member for Durham, North (Mr. Radice) knows. Any fool who did not recognise that there were some benefits in monetary union would have difficulty in explaining why we have a single currency in this country. We have a single currency because there are benefits. Equally, though, we do not have one currency throughout the world because there are certain disbenefits. Any sensible economic argument about the optimal area for a single currency must address advantages and disadvantages.

I say to my sedentary hon. Friend the Member for Durham, North that I of course recognise the advantages of a single currency. It is true that there may be efficiency gains to be had from the elimination of the costs of exchanging currencies or from the elimination of risk due to exchange rate uncertainty. I concede that. I recognise that a third of what our economy produces is exported and that 60 per cent. of our trade is with the other members of the European Community. Although it is possible to exaggerate those efficiency gains, I recognise that they exist. I also recognise that a single currency would reduce speculation by the simple device of removing some other currencies against which people could speculate, and that there could be virtues—least for Labour Governments—in such a situation.

There are costs as well, however, and they are profound. Above all, a single currency imposes restrictions on the instruments of macro-economic policy that we can use. In the context of this debate, a single currency in Europe imposes a restriction on what we can do in terms of exchange rate and monetary policy. I invite any hon. Member who thinks that this line of argument is trivial to imagine how uncomfortable the present Government would feel if they did not have some flexibility in relation to the exchange rate and monetary policy and how some of the Opposition's proposals would sound if exchange rate and monetary policy had already been abandoned.

Photo of Mr Giles Radice Mr Giles Radice Chair, Treasury & Civil Service Sub-Committee

But the Maastricht treaty leaves exchange rate policy in the hands of the Council. It is not governed by the central bank at all.

Photo of Roger Berry Roger Berry , Kingswood

I am trying to work out why my hon. Friend is being so antagonistic. On occasion, I say something with which he agrees—

Photo of Roger Berry Roger Berry , Kingswood

My hon. Friend has conceded the point that the treaty removes from the national Governments of member states the power to influence exchange rate policy —[Interruption.] I am afraid that it does. One cannot say, "Power is located elsewhere and yet at the same time resides here." It must be one thing or the other.

The cost of a single currency is that the nation states or regions that decide to join in a single currency area give up certain instruments of macro-economic policy: most notably, they have less flexibility on monetary policy and no flexibility in relation to exchange rate policy, for self-evident reasons.

At present, if a country or region in the European Community, as elsewhere, becomes less competitive—no prizes for guessing examples—balance of payments problems emerge and unemployment increases. With monetary union, balance of payments problems will re-emerge as even greater problems of unemployment. Quite simply, the market adjusts to changing levels of competitiveness by generating higher unemployment in less competitive regions. That must be so. That is how the market operates. We need to think very carefully before we support a single currency arrangement given that we know, as a matter of simple fact—there is no difference between the two sides of the Committee on this—that that is how the market adjusts to differences in competitiveness.

To return to my first point, it is a fact that, within nation state monetary unions such as the United States, Germany and this country—

Photo of Roger Berry Roger Berry , Kingswood

Yes, of course—even in the middle of a sentence.

Photo of Mr Robert Sheldon Mr Robert Sheldon Chair, Public Accounts Committee, Chair, Public Accounts Committee

The point that my hon. Friend is making is well understood. Most of what he said is absolutely right and no one ought to quarrel with it; he has put both sides of the argument. As my hon. Friend says, a union could increase unemployment. On the other hand, one could react by reducing the cost of labour. One of the principal reasons why the Government are so opposed to the social chapter is that it denies them that alternative. They must be against the social chapter because, if we are uncompetitive, such action is the only solution that they have—other than increasing levels of unemployment even further.

Photo of Roger Berry Roger Berry , Kingswood

I agree with my right hon. Friend. That is absolutely correct.

Given that these facts are well known, I shall simply re-state my point. The difference between the proposal for a single currency within the European Community and what exists today in the United States, Germany and the United Kingdom is that, in the case of those three nation states, there are substantial fiscal systems that redistribute resources. There is automatic fiscal redistribution in the United Kingdom, as areas of high unemployment contribute less in tax and receive more in revenue. In Germany, there are formal systems for the redistribution of wealth between the lander.

The Maastricht treaty contains no equivalent way of addressing such imbalances. That is why I argue strongly that it is simply not sensible for member states of the European Community to sacrifice instruments of national macro-economic policy without much larger European Community budget and/or automatic redistributive mechanisms. Maastricht provides neither. It will therefore be profoundly deflationary in the less competitive regions.

Photo of Clive Betts Clive Betts , Sheffield, Attercliffe

I accept the point that my hon. Friend makes and agree that additional money within the Community budget and the mechanisms to which he has referred are not specifically mentioned in the Maastricht treaty. Does he not accept, however, that such matters are capable of development within the European Community? There is no restriction in the treaty to prevent them from being developed. Might not that be another way of looking at the situation? Might we not take the view that monetary union can be developed in the context of other measures to stop the problems of unemployment, which I recognise and on which I agree with my hon. Friend?

Photo of Roger Berry Roger Berry , Kingswood 8:30, 24 March 1993

That is a bit like saying that the Budget that we have just debated is capable of being developed to allow us to address mass unemployment in Britain. Of course it is capable of being so developed. The fact that that subject was not dealt with in the Budget was the reason why the Opposition said that it was inadequate to address unemployment and economic recovery. Anything could happen after Maastricht. But there is a treaty before us which contains words and which we must read and understand. Running through the many pages of the treaty dealing with economic matters is the single-minded obsession with the monetarist objective of zero inflation and the monetarist instrument of an independent central bank controlling monetary policy. There is nothing of the kind to which my hon. Friend refers.

Photo of Mr Peter Mandelson Mr Peter Mandelson , Hartlepool

On the subject of obsession, my hon. Friend appears to be overly obsessed by the words and gives insufficient attention to the actions that can be taken by politicians and Governments within the framework of the Maastricht treaty—[Interruption.] It is not good enough for those who disagree with other hon. Members to bawl and shout and attempt to prevent them from speaking. That is an unattractive characteristic of this debate. It shows an obvious weakness of argument among some of my hon. Friends.

My hon. Friend the Member for Kingswood (Dr. Berry) referred to the Budget. Is he aware that it is up to politicians and Ministers to take decisions, to form judgments and to implement policies? What is in the Maastricht treaty that prevents politicians and Ministers from taking such desirable decisions within the economic policy guidelines which are a feature of the treaty and which it is up to politicians to draw up and implement?

Photo of Roger Berry Roger Berry , Kingswood

As my hon. Friend wants chapter and verse, I quote article 107: When exercising the powers and carrying out the tasks and duties conferred upon them by this Treaty and the Statute of the ESCB, neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body. The Community institutions and bodies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks.

Photo of Roger Berry Roger Berry , Kingswood

My hon. Friend will agree that I have not barracked anybody so far. I am attempting to answer his question. If he thinks that that article, explaining how politicians cannot influence the central bank, is inadequate, perhaps he will allow me to summarise my understanding of the provision, and then he can explain why the words mean something different to him. I am not a lawyer; I am a humble hack—

Photo of Roger Berry Roger Berry , Kingswood

Yes, I plead guilty to being one of those. On the basis of my knowledge of the English language, article 107 instructs the European central bank and the Bank of England—denationalised by then, under the treaty—not to take instructions from anyone. It also commits the signatories to the treaty not to seek to influence the European central bank or national central banks.

Photo of Mr Giles Radice Mr Giles Radice Chair, Treasury & Civil Service Sub-Committee

My hon. Friend argues that economic and monetary union is against the interests of the weakest regions. There is in the Maastricht treaty—whether it is adequate is debatable; I do not think it is sufficiently adequate—a mechanism for dealing with that problem. It is called the structural fund and the cohesion fund. If my hon. Friend had mentioned those funds, he might have had a fair point. He is implying that there is no mechanism in the treaty to deal with such problems. There is a mechanism, though it needs to be expanded.

Photo of Roger Berry Roger Berry , Kingswood

Redistribution takes place in the European Community. I thought I had pointed out that its extent was inadequate to justify the unleashing of a single currency on member states. In essence, I do not believe that the degree of economic, social and political cohesion necessary for the benefits of a single currency to outweigh the costs exists in the European Community now. I happily recognise that there are benefits from a single currency, but it is foolish in the extreme simply to assume that the costs in terms of rising unemployment that a single currency would impose now could be addressed through the terms of the Maastricht treaty.

There is also a nonsense in the Maastricht treaty as it tries to separate monetary policy from the rest of economic policy. How is fiscal policy—public expenditure and taxation policy—to be run in such circumstances? It cannot be left to a few simple rules about budget deficits. Limiting the size of public sector deficits does not determine a fiscal framework, because the macroeconomic effects of a budget depend on much more than the size of the deficit. One could have the same deficit for radically different levels of expenditure and taxation. It is rumoured that there are some heretics in this place who might believe that we should have higher levels of expenditure and possibly even higher levels of taxation.

A fiscal policy cannot be determined purely by the size of a budget deficit. Fiscal and monetary policy must be determined together. If one produces a budget, one must discuss how it is to be paid for. It would be ridiculous to have one body—in this case an independent European central bank—setting monetary policy, whatever the objectives, with fiscal policy for Europe being determined somewhere else.

There is logic in the argument that, if there is to be monetary union in the European Community and a single currency, we must have political union as well so that there can be democratic control of economic policy. Maastricht does not set out to do that. It hands over monetary policy to the control of non-elected and unaccountable bankers with the legal requirement that they deflate the European economy, but it says little about how that fits in with other aspects of economic policy in Europe. I cannot see how any democrat could support that.

It seems self-evident that the political, economic and social cohesion necessary for a single currency in the EC does not exist today. Any democrat who was arguing for monetary union now would have to argue for political union as well. That would be the only way to achieve democratic control.

In other words, the options are simple. Either we maintain our separate currencies—and co-ordinate European policy, so long as that is in favour of reflation and not deflation; we assume that we co-ordinate in the desirable direction, though there is some evidence that we do not always do that—and co-ordinate our economic policies to aim for full employment and economic recovery, or we go for a single currency and European political union. I do not believe that the second is either on offer or is desirable at this stage, so I strongly support the first of the two options.

The middle way that says, "We shall not go for democratic institutions in Europe that will control economic policy at a different level from the present nation state but will, on the other hand, hand over the control of monetary policy to non-elected bankers" is confused, monetarist and undemocratic, and will lead to rising unemployment in Europe and, in so doing—paradoxically, perhaps, in the view of some of those advocating it—will lead to greater division in Europe.

I do not want Europe to be rent asunder by an economic package which will increase unemployment and thereby divide. I want a Europe which addresses full employment. The Maastricht treaty does not do it. I hope that at least one of the amendments in this group—whether it is amendment No. 36, amendment No. 101 or whatever—which effectively undermine the proposals for a single currency, is carried, because otherwise it will be a disaster for not simply the United Kingdom but the other economies in Europe.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

I shall try to focus the Committee's attention on the effects of creating a European central bank on the people of the United Kingdom, the politicians who represent them and, indeed, the political parties to which we all belong. I apologise for quoting article 107 again, but I shall paraphrase: neither the ECB, nor a national central bank…shall seek or take instructions…from any government of a Member State". In other words, we will remove from the House and, therefore, the control of the people of the United Kingdom that essential element which gives them control over their destiny—money. Money is power. Through the ages, people and politicians have recognised that control of money is the control of power. If we cede the control of money to a European central bank by this Bill, we shall have effectively ceded the control which the people in the United Kingdom previously vested in their elected representatives in the House.

Photo of Dennis Skinner Dennis Skinner , Bolsover

What does the hon. Gentleman think of the idea that one cannot control what one does not own?

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

The hon. Gentleman is absolutely right; I entirely agree. I should like to ask the Financial Secretary how the Government, who do not believe in returning the Bank of England to the private sector, are prepared, by dint of this treaty, to cede control of the whole of the British economy to an unelected and uncontrollable European central bank without first experimenting in the United Kingdom to see whether it can possibly work. It seems to be entirely illogical that we should proceed along those lines without at least experimenting in our own country, especially when we have a Government who are committed to returning most state institutions back to the private sector.

I hope that the Financial Secretary will respond to my question because many of my constituents find it difficult to understand why, when we are privatising commercial undertakings—at present we face the prospect of privatising the railways—we do not consider that it is important to privatise the Bank of England. At the same time, we are saying that they must support a treaty which will remove instruments that I would prefer to vest in the control of the Bank of England to a European central bank where nationals of other countries will control what our monetary policy will be. It follows that those nationals will also be controlling our fiscal policy.

I shall come back to my theme, which is the effect that the transfer of control and power to a European central bank will have on us and the people whom we represent. If we reach the point—which we inevitably will—at which we are not free agents in this House to make those decisions which the electorate expect us to make, it will be a poor day for British politics and British politicians. The effects of removing such powers from the United Kingdom and vesting them abroad is that, at a stroke, one divides the two principles of good management—authority and responsibilty. In any properly managed organisation, those two principles must be vested in the same pair of hands.

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The people of the United Kingdom look to us to be responsible for all that goes on in this country and all that which affects their lives. If we decide that we will put the authority for much of what we must decide beyond our shores to be decided for us, we will create the classic symptoms of bad management. We will have put authority in one pair of hands and vested responsibility in another pair of hands. Anyone who has any experience of management knows that that simply does not work.

Many right hon. and hon. Members appreciate the unsatisfactory nature of having to tell constituents, "I understand your complaint. I sympathise and agree with your complaint, but it is out of my hands. I cannot do anything about it." I submit that the electorate will not put up with that. People will soon become disenchanted, first, shall we say, with the Conservative Government. They might even be tempted to vote for the Opposition party. It will not be long before the Labour party is proved to be in exactly the same powerless situation as that which I have described. In due course, people will conclude that there is no point in voting for any politician or any party. That is a dangerous position in which to put our country. It will mean that people will feel that there is no point in voting for any party and will, therefore, vote for no party.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South

Does it follow that, if such power is handed to a central bank and if people who are elected to government are able to shrug off any responsibility by saying that it is not their fault or responsibility because the decisions are made by the central bank, and the procedure was approved by Parliament through a treaty, a degree of alienation will develop which will result in people taking action, possibly by violent means, as my right hon. Friend the Member for Chesterfield (Mr. Benn) said, to seek alternative solutions to the real problems of, for example, widespread unemployment which might result from the decisions of a central bank?

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

That is exactly my fear. In extreme circumstances, we will reach the position described by the hon. Gentleman and, indeed, portrayed by the right hon. Member for Chesterfield (Mr. Benn).

The right hon. Member for Chesterfield used an interesting word. He talked about the "confidence" of the nation. I do not have much confidence standing up in the Chamber and delivering a speech, but I have every confidence that my views are absolutely sound. I have not a scintilla of doubt that when I oppose the treaty, and especially when I oppose those new clauses before us tonight, I am doing the right thing because I am in tune with the people whom I represent and the majority of people in the United Kingdom.

Whether or not the majority of the people of Britain are right or wrong on the issue is not the point. If the majority of the people believe that we should not sign the treaty—I believe that that is their view—we should not sign it. If one believes in democracy, one believes that the view of the majority should prevail.

The hon. Member for Bradford, South (Mr. Cryer) said that many politicians and Ministers would find themselves powerless to answer responsibly to the electorate. He may recognise that some right hon. and hon. Members might be content with that position. I do not suggest that the hon. Gentleman would be content with it. I have a different opinion. I believe that he would stand up robustly for the views that he holds—with which, incidentally, I disagree, except on this issue. He would not be afraid to stand up for his views and defend them to the people he represents.

However, sad to say, other hon. Members might be content to shelter behind the European central bank or the Common Market and say to the people, "We have done our best. We would like to do more, but sadly the matter is out of our hands." I agree with the hon. Member for Bradford, South that that would lead to great alienation in our nation. We should not underestimate for one minute the threat to our democracy from proceeding with the establishment of a European central bank.

Of course, the establishment of a European central bank would inevitably lead to a central currency. My hon. Friend the Member for East Lindsey (Sir P. Tapsell) suggested that there would be 12 Chancellors of the Exchequer if we had a single currency. I agreed with much of what he said in his excellent speech, but I disagreed with him on this one detail.

If we had a European central bank and a single currency, there would be but one Chancellor of the Exchequer in Europe and the prospect is that that Chancellor would not reside at No. 11 Downing street. He might not be a Member of this Parliament. There is a great possibility that he would be German. That theme was developed by my hon. Friend the Member for East Lindsey. He forecast that the creation of a central bank and single currency would mean that the deutschmark became the currency of the European Community.

Photo of Mr Bob Cryer Mr Bob Cryer , Bradford South

Does the hon. Gentleman accept that some people have the mistaken notion that the Maastricht treaty brings nations together and that we should work towards some conglomerate, as if that was an idealistic aim? Does he agree that where nations are compelled to join together, tensions and antagonisms are created, as we have seen in eastern Europe, following the break-up of the Soviet bloc? An enormous degree of nationalism has developed and vicious tensions have arisen which have led to enormous tragedies. The idea of forcing nations together instead of nations working together as equals is festooned with doom and potential disaster.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

I am more than willing to respond to that intervention, but if I do so directly, I risk being ruled out of order by you, Dame Janet. I shall answer the hon. Gentleman's question in the context of the European central bank. He and I talk the same language. I suggest that if 12 Finance Ministers sat round a table trying to decide matters which affected the economic and monetary policy of the European Community, the decision that would emerge from their deliberations would not satisfy him or, indeed, me. Nor would it satisfy the citizens of the 11 other nations which were party to the deliberations.

It is a simple fact that any decision reached by 12 Ministers on future policy would be a compromise. No other country would accept what Britain would like to see imposed any more than Britain would accept what another country would like to see imposed. Already we have so many examples of decisions affecting Britain which have been taken by that process of compromise. Decisions invariably arrive after the event. They are almost invariably late. We do not get decisions when we want them. When they arrive, they are compromises. That is the nature of the beast. They fit where they touch.

The establishment of a central bank would affect the people we represent. Indeed, people will increasingly resent having to accept a compromise decision which they feel in their bones was not the decision that their Members of Parliament in their sovereign Parliament would have reached if they had been in a position to do so. If people feel that they cannot get a satisfactory answer from their elected Members in debates in their own Parliament, they will become disillusioned and disenchanted with the whole body politic. That is very dangerous to our democracy—I stress the words "our democracy".

Our democracy is much older than any of the democracies of the 11 nations which compromise the European Community. Our democracy has evolved. It may not be the perfect democracy, but it suits the British people. The system of democracy that we have built up in this Parliament has been founded on the unions created in the British Isles many centuries ago. It just happens that our system of government suits us in the main. People criticise it—it is not perfect and I do not pretend it is but the system has evolved over many centuries and it suits us now.

Of course, we try to compromise. We keep coming back to that word. Now we are trying to compromise our system of government, which I stress has suited us for many centuries, within another system which also has to accommodate the systems of government that have built up in 11 other nations.

Photo of Mr Giles Radice Mr Giles Radice Chair, Treasury & Civil Service Sub-Committee

The hon. Gentleman was extolling the virtues of British parliamentary democracy. Would he care to comment on the following point? As far as I understand it, we are the only Parliament of the Twelve that does not have the power to ratify treaties.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

That is an interesting point, but the hon. Gentleman knows what we are debating and why the House gives such great importance to the Bill. He knows that we have taken so many days to debate it simply because of the importance that we and—I shall not miss the opportunity to say—the people we represent attach to this particular subject.

I was speaking about the union of the United Kingdom. For hundreds of years, we have had a union, or one could say a common market, within the British Isles. We certainly have a single currency. The conclusions that I draw from our history are perhaps different from those expressed by other hon. Members. It is an object lesson for Britain to learn as it shapes up perhaps to partaking in a broader Europe involving a European central bank and a single currency. A single currency has not removed all the frictions, difficulties and tensions in our society.

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What inevitably happened and will continue to happen is that richer regions of the United Kingdom have to divvy up each and every year to make funds available to the poorer regions so that those poorer regions can be sustained within the overall union of the United Kingdom.

Those who believe that our involvement in the European Community will benefit our own regions delude themselves. Britain is already paying some £2 billion net each year to the Community. That money does not return to these shores. Opposition Members might support my view that that money could usefully go to the regions of the United Kingdom, but is more likely in future, through the cohesion fund, to go to Greece, Portugal, Spain and Southern Ireland. That will be the effect of the greater union that we are now creating. Instead of the wealth of the nation being used to support our regional policy, it will be used increasingly to support other economies.

As an example of how the creation of another single currency has worked to the disadvantage of Britain, I instance what has happened in agriculture. Many right hon. and hon. Gentlemen will appreciate that through the common agricultural policy we have effectively created a common currency—the green currency. To some extent, we have created the equivalent of a European monetary system because, through the compensatory allowances, the green currencies can be adjusted so that no country is disadvantaged. The result has not been enormous prosperity in farming or great happiness to farmers, but quite the reverse. The taxpayer, both directly though his taxes and indirectly as a purchaser of agricultural produce, has had to pay a very high price.

I am mindful of a statistic which my hon. Friend the Member for Southend, East (Sir T. Taylor) has quoted before. If Britain simply gave every farmer each year the index-linked equivalent of £127,000, that would represent a saving to the Exchequer compared with what is happening now. Although we spend more than £127,000 per farmer each year, our agriculture is in a parlous state and very few farmers are content with their earnings and the profitability of their businesses.

Here again one sees a single currency effectively at work, but it has not delivered prosperity or easier working in that industry; it has delivered the absolute opposite.

My hon. Friend the Member for Lindsey, East spoke about the possible aspirations of the German people for the deutschmark to become the currency of Europe after the creation of the European central bank and of a single currency. If the Germans were able to achieve their aspirations, it would preclude English people from achieving any of theirs.

That is a feature which many young people in this country recognise today. They are looking askance at this treaty, which we may be in danger of signing, because they see that signing it will remove from them much of the responsibility for their lives and the authority to do something about their lives and their country. They can see responsibility for the future of their country passing from these shores and being vested in the hands of the nationals of other countries. Many young people today, therefore, are totally opposed to the treaty, to the creation of the single market and to the creation of a European central bank because they see the total erosion of any prospect of their controlling the destiny of their country.

Every one of us, within our limitations, aspires to be able to do something for our country. I feel passionately strongly about this country and about the ability of its people to manage their own affairs, control their own destiny and deliver the standard of living and way of life that they want. Young people, in particular, recognise that all the time we cede power from Parliament we are disposing of their future ability to serve their country and their people and to provide for their families in the way that they would like.

In the end, what is important and what we must take seriously in doing whatever we do in the House is to create the circumstances in which the people of this country can see their aspirations achieved. If we cannot do so, we should not be signing the treaty. If we deny the people the achievement of their legitimate aspirations, we risk unleashing forces which it will be difficult to control. Many argue that the treaty is necessary to suppress the forces of nationalism. I take the contrary view. If, by whatever means—the creation of a single currency or the creation of a European central bank—we deny people the opportunity to achieve their natural and legitimate aspirations, we shall encourage in the British Isles more nationalism than is perhaps already there.

The richer regions of this country are continually funding the poorer regions, but that does not buy happiness or peace because never a year goes by without the Scots, Welsh and Irish coming back to the Hous—and they do not come to say, "Thank you, we're grateful," but to say that it was not enough.

Photo of Mr Walter Sweeney Mr Walter Sweeney , Vale of Glamorgan

Does my hon. Friend accept that ratification of the treaty would lead to increased nationalistic tendencies and to a sense of the denial of democracy—to a feeling of frustration—which might result in disorder on the streets?

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

I have answered that argument in one way, but I should like the opportunity to do so in another, Dame Janet.

The Second Deputy Chairman:

I hope that the hon. Gentleman will do so in a way that relates to the amendments under consideration.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

I shall do my level best to ensure that I meet those requirements, Dame Janet.

The coinage of the realm is at stake. If it