As I said in my Budget speech to the House on
"I will present the Government's statement on the assessment on the euro by the first week of June.
I am grateful to the right hon. Gentleman for that reply. Given that the so-called five economic tests have not been met, and that the harder the Government have tried to persuade the British people of the case for euro entry, the more strongly they have resisted, why does not the Chancellor abandon any plan to hand over massive powers for ever to people whom we do not elect and cannot remove, and concentrate instead on the crisis in our public services, which is letting people down week by week, month by month, and year by year of this failing Labour Government?
We will take no lectures from the Conservatives about either how to run a European policy or how to run our public services. As far as the five economic tests are concerned, those tests are designed to examine whether it is in the national economic interest to join. Some people, like the Conservatives, would refuse to join as an act of dogma, even if it were in the national interest, and some, like the Liberals, would want to join irrespective of whether the five economic tests were met. Our position is the right one, and I will report to the House in due course.
Does my right hon. Friend accept that even those of us who are supportive of the European project and of joining the euro at some point feel that recent events with our European partners over Iraq has made it less likely in the short term than it might otherwise have been? Does he agree that to go for a referendum early and fail would be the worst of all policies?
Will my right hon. Friend also make it very clear to the House that he rejects totally the nonsense peddled by Conservative Members that we must never, under any circumstances, join the euro?
The issue is that this is a long-term decision about the future of Britain. It should be made not on short-term considerations based on foreign policy or on other events that are happening this year, but on a long-term assessment of the national economic interest.
As for those people who would rule it out as a matter of principle, I have said before in this House that if the case for joining is clear and unambiguous on economic grounds, the constitutional factor should be taken into account, but it should not be an overriding factor. It is a pity that Conservative Members, who said that they were ruling out the single currency for the duration of a Parliament, now appear to be ruling it out for ever.
Does the Chancellor agree that there can never be a satisfactory convergence of exchange rates in Europe that will be permanently beneficial to Britain unless the age-old trade cycle is exorcised from the economic textbooks? Does he think that that is at all likely?
I do not agree with the hon. Gentleman. He is finding another way to justify ruling out a single currency on the ground of principle and as an act of dogma. I hope that those in his party and others who support that position will recognise that the assessment is about whether this is in the national economic interest. We are looking at investment, employment, financial services, sustainable convergence and issues of flexibility in the economy. Those are the tests that ought to be met, and it is on that basis that we will make a judgment in the national economic interest. It would be wrong for this country to rule out the single currency, as the Conservatives want to do as a matter of dogma.
On all the details relating to the single currency, my hon. Friend will have to wait until the statement is made in the House of Commons. We will publish the 18 studies. This is the most detailed, comprehensive and rigorous assessment of these issues that has ever been made. It is a lesson of history that nearly 13 years ago, when the country joined the exchange rate mechanism, no analysis was done, no preparation was done, and no assessment was made. The result was the disaster presided over by the shadow Chancellor, who was Secretary of State for Employment at the time; we will not make those mistakes.
Inward investment in Europe in the decade before the launch of the euro averaged 39 per cent. for the UK, but Britain's share since the euro was launched three years ago has averaged only 23 per cent.—almost half the previous figure. Does the Chancellor attribute that to Britain's absence from the euro or his economic failures in the UK?
The hon. Gentleman has to look at the picture in some detail. Inward investment from the United States as a share of investment in Europe and Britain has increased. One cannot extrapolate a general picture from one year's figures.
Or from three years' figures. The issue must be considered as a whole. That is why one of the 18 studies is being conducted on inward investment and general investment. I hope that the hon. Gentleman will be sufficiently patient to consider the results when the assessments, especially that on inward investment, are published.
For far too long, the Liberal party has held the position that it wants us to join the euro irrespective of the economic issues. That would repeat the mistakes of 1990 when we joined the exchange rate mechanism. We need a proper analysis and assessment. We shall not repeat mistakes, nor should the Liberals.
While we await the report on the assessment of the five economic tests with great interest and anticipation, does my right hon. Friend agree that a review of the stranglehold of the stability pact in the European Union is long overdue? Will he confirm the Government's policy that there will be no harmonisation of taxation in the European Union in pursuit of euro membership?
We have already made our position on taxation clear. We have examined matters that relate to the stability and growth pact in European Finance Ministers' meetings, and further discussion will take place. We made the points that the stability and growth pact must take account of investment and acknowledge that there are pressing reasons for countries to make long-term investments. It must take account of the economic cycle, as the latest recommendations attempt to do, and the sustainability of the debt position. We have made those three points about the stability and growth pact consistently. I am pleased that opinion in Europe is moving in our favour on all those matters.
Has it momentarily escaped the Chancellor's mind that he and the Labour party supported entry into the ERM and that his permanent secretary is on record as saying that the five tests can never be clearly and unambiguously met?
In the past few weeks, we have read reports that the Education Secretary, the Health Secretary, the Trade and Industry Secretary and the Defence Secretary were gearing up for a concerted attack on the Treasury; that the Welsh Secretary has said that the pound has fallen to levels that would make British membership of the euro possible; that the Chancellor's faction has briefed that a referendum will be ruled out before the next election, and that the Prime Minister's faction has briefed that the Chancellor's chief economic adviser should be sacked for poisoning the Chancellor's mind. Is not it clear that the Cabinet is in disarray over the issue? Will not the terms of the Chancellor's forthcoming statement be determined not by an objective assessment of the effect of euro membership on jobs and prosperity in this country but by the outcome of the furious faction fighting in the divided Cabinet?
Why cannot the Conservative party address genuine issues to do with the economy? When we discuss stability, employment, investment and financial services—the subjects of the tests—Conservative Members can only cite unattributable gossip. The shadow Chancellor was Employment Secretary in 1990, and he cannot escape his responsibility for the events of 1990 to 1992. The British people will never forget them: 15 per cent. interest rates, mortgage repossessions, negative equity, businesses going bankrupt and massive deficit. The Conservatives will never be forgiven.
May I commend the Chancellor on his rigorous approach to the economic tests and direct his mind to the Treasury Committee's equally rigorous approach in its report, "The UK and the Euro"? I draw to his attention the comments of Professor Michael Moore of Queen's university, Belfast, who said that waiting for two economies to converge was like waiting for two lovers to pick the perfect moment for marriage—it will never happen. Convergence can take place only within a monetary union. On that basis, what criteria is my right hon. Friend using to ensure that we will ultimately have sufficient convergence with euro countries?
Question one of the tests relates precisely the point that my hon. Friend ends with. It asks whether there is sufficient convergence for Britain to be able to live comfortably with the interest rate set in the eurozone. Question two, if I may put it like that—the second test—is about whether there is sufficient flexibility. My hon. Friend rightly points out that this is a serious economic analysis of the consequences for Britain and Europe. We are looking at these issues in more detail than any Government have done in the past. We are not going to make the mistakes of the early 1990s, and I believe that the House will look forward to seeing not only the 18 studies that are being produced on all the difficult issues that my hon. Friend mentioned, but the assessment itself. I praise the Treasury Committee for involving itself in the detail of this work, and I just wish that the Opposition would take the issue as seriously.