European Affairs

Part of the debate – in the House of Commons at 4:19 pm on 9 December 2008.

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Photo of William Hague William Hague Shadow Secretary of State (Foreign Affairs) 4:19, 9 December 2008

The hon. Gentleman anticipates a passage a few pages later in my speech. Having not talked about the euro for many years, I have been given the opportunity to do so again today by Lord Mandelson's blundering into the matter. I shall come to the hon. Gentleman's point shortly, but first I want to finish my point about the fiscal stimulus to which the Foreign Secretary referred, when he called in aid other countries around Europe. I am surprised that he did not cite the Irish Government, who have said:

"The priority for countries like Ireland, with relatively high general government deficits, is to get our public finances back in order"

—or the German Chancellor, Mrs. Merkel, who has rightly said:

"We should not get into a race for billions."

If the Foreign Secretary will not listen to a Conservative Chancellor, he ought to listen carefully to Germany's Social Democrat Finance Minister, who has said:

"Since I've been dealing with economic stimulus packages since the end of the 1970s, they've never had the real effect that was hoped for. In the end the state was just more in debt than before."

He also said:

"Just because all the lemmings have chosen the same path, it doesn't automatically make that path the right one."

The Foreign Secretary may think that the German Government have the same view as our Government, but the German Government themselves do not think that they have the same view as the British Government, and the British Government should take careful note of that. What I have quoted represents the approach of a responsible centre-left party in a Government who are not set on doubling their national debt over the next four or five years while spending more on paying off debt than they spend on schools and transport, which is what is happening at present in the United Kingdom. Ministers might also benefit from listening to other advice that some EU Governments have been kind enough to offer. In particular, they might wish to pay attention to Madame Lagarde, the French Finance Minister, who has gently explained:

"I do not like to disagree with my friend Alistair but as far as we're concerned...we're not certain that when prices go down a VAT reduction is that effective".

The truth is that the Government are isolated in Europe, having lectured others about supposedly being isolated.

Members might have wondered why the European Commission avoided recommending specific measures on national stimulus proposals in the economic recovery plan to which the Foreign Secretary referred. One European diplomat leaked the reason. He spoke on condition of anonymity, no doubt fearing he would be arrested if he came to this country. He said:

"Several member states would have liked to openly back some concrete ideas on the preferred instruments for the national recovery packages, but they disagreed to support the idea of VAT cuts, but the UK did not want to see this measure missing on the list, so as to avoid criticism at home for taking this approach. So the conclusion was not to include any preferable measures."

The Government therefore preferred to have no list of recommended measures than one that emphasised their own minority, and isolated, position.