European Single Currency

Part of Opposition Day – in the House of Commons at 9:47 pm on 21 July 1998.

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Photo of Mrs Helen Liddell Mrs Helen Liddell Economic Secretary, HM Treasury, The Economic Secretary to the Treasury 9:47, 21 July 1998

We have had a very interesting and mature debate—suffice it to say that it has been so mature that the bovver boys have disappeared. [Interruption.] I do not honestly class the hon. Member for New Forest, East (Dr. Lewis) as a bovver boy. We can discuss that later.

I commend the Liberal Democrats for having this debate because it has exposed some interesting issues. The hon. Member for Twickenham (Dr. Cable) exposed the difference between us. I accept that there is much that unites us on this issue, but he argues for a referendum on the principle, while acknowledging that many of the pre-conditions are not yet right, whereas we say that we must get the pre-conditions right in terms of economic convergence and then put the economic case for the single currency to the British people.

That is a substantive difference. It comes back to the issue of preparation. When we went into the Treasury on 2 May last year, the one thing that was glaringly obvious was that the single currency was the subject that dare not speak its name. The previous Government had been so riven by divisions on it that the necessary and practical preparations for a significant and major change—not necessarily for us, but for our European partners, which would therefore impact on us—had not even been thought about.

During tonight's debate, that schism has become more and more apparent. The right hon. and learned Member for Rushcliffe (Mr. Clarke), in a brief but succinct speech, showed a significant change in his position. When he was Chancellor of the Exchequer, his position was that we should keep our options open. Tonight, he argued for an early referendum.

Many hon. Members believe that the stance of the Conservative party is no single currency for at least 10 years. However, in response to a question from my right hon. Friend the Chief Secretary, the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), said that he could not see a time when Britain would join a single currency. That is a significant change on which commentators and we will reflect for some time.

Tonight, the debate has concentrated on an issue that should have been concentrated on by the previous Government. The last time we debated it was on 31 April, on the eve of my right hon. Friend the Chancellor and me going to Brussels for that significant weekend—[Laughter.] I am afraid that the juvenile tendency has crept back in again. On that weekend, 11 countries decided to join the single currency. Eleven countries are to join the euro zone. The European central bank is now up and running—[Interruption.] I am sorry that hon. Members seem to be having difficulty following this quite substantive issue.

This morning, I visited the Royal Mint at Llantrisant, which is preparing euro coins for France, Germany and Finland. With five months to go to the beginning of the single currency, other countries are preparing, while Britain is having to run fast to catch up because the previous Government could not bear to address the issues involved in preparing for a single currency. There are major issues. They are not just about information technology and changing accountancy; they are strategic issues for British business to ensure our competitiveness. That point was missed by the shadow Chancellor when he spoke. Significant strategic decisions must be taken.

The hon. Member for Gordon (Mr. Bruce) said that if we made the decision to join the single currency, that would alter the position of sterling. He has fallen into the trap that the previous Government fell into—seeking short-term solutions rather than long-term solutions for long-term gain. One of the key elements in our decision on a single currency—and, indeed, in our relationship with our partners on the issue of a single currency—must be that we have established economic stability in our country and also created the necessary convergence and flexibility to withstand external shocks. That is exactly what my right hon. Friend the Chancellor has been trying to do.

The hon. Gentleman said that he would be more convinced of our position if it were clear that we had put in place a programme that fulfilled the five tests to which my right hon. Friend the Chancellor referred in his statement on 27 October. In fact, we have begun that process because it is sound economics. The hon. Gentleman, in a courageous speech, made the point that stability in growth is good housekeeping. It is, and it is also good and sensible economics.

The Government are achieving macro-economic stability by our sound fiscal and monetary policies. We are creating the right framework for low inflation by our reforms of the Bank of England and our commitment to monitoring the inflation target in the light of the European central bank's practices. We are ensuring that our fiscal rules and deficit reduction plan continue to be consistent with the terms of the stability and growth pact, thereby underlining our commitment to avoid an excessive deficit. We are promoting greater flexibility in the United Kingdom economy by our welfare to work programme and our investment in long-term skills. In essence, we are attempting to prepare, so that the British people are able to decide on the matter based on the Chancellor's sensible economic tests.

The hon. Member for Gordon asked—it is in his motion—why the Government do not publish six monthly reports by the Treasury and the Bank of England". We have no plans to publish such reports on interest rate convergence. As we said, it could take a period of time—which cannot be finite—to demonstrate sustainable convergence. As the hon. Member for Twickenham (Dr. Cable) well knows, economics is not an exact science. We shall have to establish a period of stability. The important issue, which the Government are addressing, is one of ensuring that that stability is delivered.

Many of the points raised by hon. Members in this debate were essentially about our economy's ability to operate successfully within a single currency. There will be significant issues in dealing with the changeover to a single currency, should we decide that it is in Britain's best economic interests to join it. As the issues are so significant, the Chancellor has already established a standing committee to examine the critical preparations for 1 January 1999. It is in the interests of every single hon. Member to stress to businesses in their constituency how important it is to make those preparations for 1 January 1999.

The Government are also addressing the larger issue—about the preparedness of British industry to become part of a single currency. Before the end of this year, the Government intend to publish a draft national changeover plan. We shall have to address the issues. The British Bankers Association has already pointed out to us the critical issues that the banking community will have to consider in preparing for the single currency. Although the financial sector is better prepared than any of the other sectors of our economy for the changeover, the other sectors must address the critical issues that will have to be considered in preparing for the transition.

The people of the United Kingdom have still to engage in the debate on the single currency—which is another argument against precipitately holding a referendum. So far, the debate has been one of yah-boo—primarily among the Euro-sceptics of the Conservative party, although I accept that there are Euro-sceptics also in the Labour ranks—rather than about the substantive issues.

How will people feel when they go to the costas in Spain and the German in the next sunbed is paying for his beer in euros, has not had to pay any commission to a travel agent before his holiday and will not have to pay whenever he comes—[Interruption.] Those are the issues that ordinary people will address. When they return to the United Kingdom from their holiday and can use euros over the counter in Marks and Spencer, they will turn round to us as politicians and ask, "What preparations have you been making?" That is when the Government will be seen to have been making the necessary preparations.

I tell the hon. Member for Gordon that I accept the Liberal Democrats' anxiety to be part of a single currency. For the first time ever, we have a British Government who are not opposed to the single currency in principle. The key issue must be whether it is in our long-term interests as an economy. That is what we are seeking to judge.

Our central Government objective of seeking to achieve high and stable levels of growth and employment underlines the extent to which Britain's interest must be taken into account before we make the decision. Yes, there will be a debate in this country. I hope that it will be a reasoned one and not descend into the myopia that we have witnessed on occasions among those on the Opposition Benches.

We have had an interesting debate. I commend to the House the amendment in the name of my right hon. Friend the Prime Minister.