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House of Commons

Friday 15 June 1990

The House met at half-past Nine o'clock

PRAYERS

[Mr. Speaker-- in the Chair ]

PETITION

Disabled People (Public Transport)

9.34 am.

Mr. Robert G. Hughes (Harrow, West) : I wish to present a petition from Mr. Keith Armstrong of the London Dial-a-Ride Users Association and 38,000 Londoners, who petition the House as follows :

The London Dial-a-Ride Users Association considers : That the opportunity for people with disabilities to travel on affordable public transport is a basic human right.

That door-to-door transport sytems for people with disabilities (such as Dial-a-Ride, Taxicard, Community Transport etc.) will always have an important role to play in any public transport mix. Those who drew up the petition have provided much-needed transport and freedom for many people who could never venture outside their door before the advent of dial-a-ride and disabled access transport. They recognise the work that has been done, and petition the House and the Government for more to be done in the future.

To lie upon the Table.

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EEC (Economic and Political Developments)

9.35 am

Mr. Brian Sedgemore (Hackney, South and Shoreditch) : I beg to move,

That this House considers that Britain's entry into the exchange rate machanism of the European Monetary System must be seen as a stepping stone towards the early creation of a single European currency ; regrets that the Prime Minister has encouraged Her Majesty's Government to adopt a far too shrivelled and isolationist approach towards changes in the European Community ; and believes that the interests of the British people will be served best in the future by the positive approach contained in Labour's new policies on economic and political developments in the European Community. My father died on 20 November 1939 when the German battleship, the Scharnhorst, sunk HMS Rawalpindi. Churchill spoke about it in the House. As a result of the ravages of this Europe "des patries" torn apart by war and prey to nationalism and race, I knew little about my father, but from what I have been able to glean from my mother I am sure that he would have been pleased that I am moving the motion today and seeking to set out a framework for a Europe that is prosperous, peaceful and free in which my son and his grandson can grow up. That Europe will be produced not by new weapon systems, nuclear devices on German soil or NATO reborn but by the interplay, and to some extent the interweaving, of cultural and social life inside a stable political framework.

That framework can be provided only by the European Community. Accordingly, it is time that Left-wing Members regarded the European Community as a stunning opportunity rather than a upas tree of woe. Nothing is for ever, but I have no doubt that Britain's future in the next century will be ultimately bound up with economic and political developments in the European Community. As we awaken from our isolationist slumber and are released from our imperial past, there must be exciting prospects ahead and young people in Europe certainly expect us to seize the major opportunities for political and cultural changes that are opening up.

Young people in Britain today have no interest in Labour's post-war corporatist approach or the callowness of modern Thatcherism. Europe is the arena in which a new kind of politics can emerge. Yes, there will be battles, some ideological ; yes, it will sometimes be difficult to keep up with the pace of change ; but only politicians of the past will want to opt out.

Often in politics there is a natural dynamic that is critical to the development of ideas and actions. The politicians who serve the people of their country and parties best are those who can harness that dynamic. The others end up whistling in the wind, fumbling in the dark, or whatever metaphor one wants to use.

In the 21st century the dynamic for Britain as regards the development of ideas and action will, I expect, be European, and within Europe the European Community is the only institution that can make the thing work. Of course, there are those who disagree and those who are afraid, particularly in the Conservative party, where the old certainties have given way to doubt and scepticism. Thus, the right hon. Member for Chingford (Mr. Tebbit), a recent chairman of the Conservative party, told us that the Deutsches Bundesbank is "the monetary successor to the Panzer".

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Tory historian A. L. Rowse tells us to turn our back on Europe because the British are a practical people--

"not theoretical like the Germans nor arrogant like the French". Lord Denning, a high Tory judge in despair of the European Community and the Delors report, even quotes John of Gaunt : "This land of such dear souls, this dear, dear land,

Dear for her reputation through the world

Is now leas'd out

Hath made a shameful conquest of itself."

I refer to this soporific phoney Tory romanticism, not to begin on a contentious note, because that is not my nature, but to enable the Minister to repudiate, on behalf of the Government, the views of this distinguished, if unholy, trinity. It is not as though the right hon. Member for Chingford is alone in his isolationist views. They seem to be shared to some extent by the Prime Minister. I do not want to turn this into a contentious debate, but I must say that I think that an aura of arrogance clings to the Prime Minister's shrivelled view, as she blocks progress time and again in the European Community. Like a tiny minority of Labour Members, she preaches a 17th century version of sovereignty which is unhelpful if only because it preceded the rise of both socialism and capitalism. As the Prime Minister moves from false premises to false conclusions by a logic that is somewhat suspect, is it any wonder that the Government dither about when Britain will join the ERM, fulminate against plans for monetary union, or the idea of a single European currency and believe that proposals for political integration threaten the very existence of the only version of democracy that they seem to understand?

I am sorry that my right hon. Friend the Leader of the Opposition is not in his place today. In contrast to the Prime Minister's negative approach, my right hon. Friend is to be congratulated on his support for a new European idealism. Both history and the moment, as well as perceptions of youth, are on his side. Anyone who has read Labour's policy document, "Looking to the Future"--I am sure that that means everyone here--will know that my right hon. Friend, backed by the shadow Chancellor, my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), considers that joining the ERM is but a part of a developing economic and political process that should be pursued with enthusiasm.

The Prime Minister and the Government are worried that Labour's non-misty- eyed and practical approach to the European Community nevertheless carries with it a certain amount of political glamour. Realising that, the Government are anxious to steal Labour's clothes and get Britain into the ERM, preferably later this year--I am told that the preferred date is November--and certainly before the next general election.

I think that the Government are right to press ahead, even though they may be doing it for the wrong reasons, and until this week pressing ahead was what was being talked about, until we discovered that the Government's guru, Sir Alan Walters, had returned. Even as I speak, he may be in that study in Downing street with the Prime Minister's political advisers determining Britain's economic future. We all know that Sir Alan is opposed to entry into the ERM, and I should like the Minister to tell us

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whether his presence back in Britain means that entry will be delayed, or even permanently postponed. What is the Government's position?

It is possible that I have totally misread the situation. I do not know how many hon. Members have studied the works of Alan Walters, but I have read quite a bit of what he has written. Although he says that the ERM is a half -baked proposal, he believes that monetary union and a single European currency are valid theoretical and practical options. Perhaps he has been brought in to push on faster with stages 2 and 3 of the Delors report. There are signs that there has been a significant sea change in the Government's view, and perhaps I shall return to that in a moment.

The fact that Britain will be in the ERM by the time of the next general election presents a challenge to those Back-Bench Members on both sides of the House who oppose entry. Will any of them seriously go to the electorate calling for Britain to leave the ERM? I hope that today we can bury the argument against Britain joining the ERM. Certainly there could be no question of the Labour party fighting the next general election on the basis of Britain leaving the ERM. To do so would be an act of supreme folly ; it would be electoral suicide--akin to inviting my right hon. Friend the Leader of the Opposition to take a cyanide pill on the opening day of the next general election campaign.

Mr. John Maples (Lewisham, West) : It is refreshing to hear the hon. Gentleman talk so enthusiastically about European institutions. He said that the Labour party's policy is not ideological but practical. I do not think that anyone would have any difficulty in accepting that : the Labour party has changed its policy so many times in the past 10 years that it could not be described as anything other than pragmatic.

A year ago, when the Opposition first cottoned on to the idea of joining the ERM as part of their policy--not so long ago Labour was campaigning, not to leave the ERM, but to leave the EEC--one of the conditions laid down by the right hon. and learned Member for Monklands, East (Mr. Smith) was that the ERM should get rid of its deflationary bias. For most of us, the purpose of joining the ERM is that it is an anti-inflationary mechanism, involving a commitment to maintaining low inflation. Can the hon. Gentleman tell us why that shift in Labour party policy has taken place and whether he still thinks that the ERM has a deflationary bias that ought to be cured?

Mr. Sedgemore : The hon. Gentleman implies that there is something wrong with politicians changing their minds. I remember, as a barrister, appearing before the Lord Chief Justice, who said to me, "That's your bad point, Mr. Sedgemore ; what's your good one?" I am all in favour of politicians dropping their bad points and developing their good points.

I shall go into technical economics later, but one of the technical matters that I do not want to go into in great detail is the enormous difference between an anti-inflationary policy and a deflationary policy. I shall deal specifically with the question of how much deflation must be or might be involved in entering the ERM and how much would be involved in entry at any given rate. If the hon. Gentleman is unhappy with what I say, I am sure that he will intervene again.

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I admit that in the past I have been bitterly critical of the EEC. The reason why I believe that we must take a firm stand now is that the idea of national economies controlled by national Governments is dead, and the electorate knows that. The argument today should be not about whether we should join the ERM but about when and on what terms and about what comes next.

Big bang and the development of global markets have inevitably caused some of us to rethink our positions. I grew up in the world of theories of comparative advantage in which exchange rates were driven by current account surpluses or deficits. I now live in a world where exchange rates are often driven by capital flows and where $200 billion crosses the foreign exchange markets every day, although 90 per cent. of that money is not used to finance foreign trade but represents speculative capital flows or hedging against currency changes. The power of exchange speculators is awesome. It is not constrained by, nor does it recognise, notions of political sovereignty. It can, and does, throw Governments off course. The joining of the ERM could prove critical in helping both Labour and Conservative Governments to deal with the damaging effects of currency speculation.

Some of my hon. Friends do not appear to accept that there is something heroically absurd in fighting currency speculators with political slogans and moral lectures. The unreconstructed Keynesians who met at the socialist conference in Sheffield told us that they were against Britain joining the ERM because they regard devaluation as part of the ark of the socialist covenant. I do not. Morever, I am aware--as they should be aware--that successful devaluations are often accompanied by deflation. That is usually the way in which a devaluation shifts resources from imports to exports. I am also aware that membership of the ERM could be a way of preventing sterling from rising too high as a result of forces beyond the control of the Government.

We also need to tackle the problem of inflation, which is caused partly by too much money chasing too few goods but is also part of the problem of income distribution. The public believe that the current high levels of inflation created by the Government are unacceptable. People want Tory Britain to stop leading the world in sustaining high levels of inflation. My fear--it is a real fear--is that, although there are several steps that the next Labour Government could take to reduce inflation, particularly Government-induced inflation, they will find themselves forced back into a statutory prices and incomes policy if we are not in the ERM. The political consequences of a return to such a policy would be disastrous and wholly unacceptable to the general public. Last year I was asked at what rate Britain should enter the ERM. Answering intuitively and off the cuff, I said that we should enter at DM2.60 to the pound. I was interested to read over the weekend a discussion document by the National Institute of Economic and Social Research which came to a similar conclusion after using rather more sophisticated economic analyses.

One wants a real exchange rate which in the medium term generates a sustainable current account on the balance of payments. In theory, it is possible to use purchasing power parities using the cost of a basket of goods in different countries. But that would throw up results that were inconsistent with the colossal balance of payments difficulties created by the Government.

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I conclude that the only feasible solution is to use the concept of the fundamental equilibrium exchange rate. I am sure that all hon. Members are even more familiar with that concept than me. On that basis sterling could enter the ERM in 1991 at about DM2.60 to the pound on either a narrow band of DM2.50 to DM2.70 to the pound or a wider band of DM2.45 to DM2.75 to the pound. In the transitional period-- this is the point that the hon. Member for Lewisham, West (Mr. Maples) made --during which the performance of the British economy adjusts to that of our European partners, there would almost certainly have to be one realignment if we are to avoid excessive deflation. I do not believe that sterling could enter the ERM next year as a strong currency unless we are prepared to accept deflation. The blame for that state of affairs rests entirely with the Government, who have made such a terrible mess of the economy resulting in both soaring inflation and a colossal balance of payment deficit.

I hope that the Government will reject the hillbilly, wild west advice of those who argue that we should enter the ERM at an even higher rate than exists at present. Perhaps the most ludicrous suggestion has come from Credit Suisse First Boston where Giles Keating has suggested that Britain should enter the ERM at DM3.25 to the pound. That would surely be a recipe for disaster and a recession such as we experienced in the early 1980s.

Undoubtedly, the really big decision for the Government is one which effectively they have already taken. It is the decision about joining the ERM. Thereafter the development of monetary union, the best form of which is the creation of a single European currency, should be relatively easy. If Britain joined the ERM in 1991, a single European currency could be in place by 1997. The ecu would be the currency. We would be paid in ecu, shop in ecu and business transactions would take place in ecu. Foreign exchange transactions in Europe would disappear. The Queen's head would be dropped from the currency ; but no one who takes these matters seriously will worry about that. Perhaps--I should welcome it--we shall see the heads of Rembrandt, Botticelli, Voltaire, Goethe and Helen of Troy on our bank notes.

The symbolic value for European unity in the creation of a single European currency would be incalculable. It would portend Tennyson's "The Parliament of man, the federation of the world."

It would be an act of political affirmation as well as a sensible economic step to take.

I agreed with professor David Mayes when he argued in a recent publication called "The Ecu" that the creation of a single European currency would do more to expand trade in Europe than

"all the other modest changes now being introduced under the title 1992' ".

I would go on to argue that the creation of a single European currency would change our very way of thinking about Europe and alter the horizons of the British people. It would be a dynamo for social and political change. It could offer hope of a cultural renaissance for this little, backward, fractious island off the coast of north-west Europe with a culture close to irreversible decline. In more prosaic economic terms, the main advantage of a single European currency would be, first, the expansion of trade in Europe ; secondly, the elimination of exchange rate risks in currency transactions within Europe and, therefore, victory over the currency speculators ; thirdly, the improved stabilisation of the European economy with

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pooled reserves used more effectively ; fourthly, improved macro-economic management as a result of co-operation with our European partners ; and, fifthly, currency movement in the international market would neither make British industry uncompetitive relative to Europe nor stimulate British inflation. The attitude of the Government is somewhat negative. It is based on the argument that macro- economic policy would be surrendered to European institutions. But a move to create a single European currency need not involve the British Government or other European Governments giving up the right to borrow and repay debts at their own risk. It need not involve economic union or the control of fiscal policy by centralised European institutions.

Jacques Delors, perhaps the greatest living European, got this part of his report completely wrong because of his federal bias. I am sure that Professor Alan Budd and Professor Goodhart are right to assert that in both theory and practice neither monetary union nor the creation of a single European currency requires a transfer of control of national fiscal policy from individual countries to a central Community authority. Binding rules over budget deficits would be neither necessary nor desirable.

Professor Goodhart in particular, drawing on the experience of the operation of the gold standard, has shown that the creation of a single European currency would not require the transfer of more executive powers to the European Commission in Brussels. The EC could evolve flexibly allowing other European countries such as Hungary or Czechoslovakia to join a single currency entirely free to choose whether they integrated economically or politically with the EC. For political reasons, I should like to see that integration, but the choice would be theirs. The Chancellor and I seem to be agreed on that point because we have discussed it in the Treasury Select Committee.

Of course, the creation of a single European currency would probably necessitate the establishment of a European central bank. Such a bank would need a degree of independence in its operation, but in my view it must ultimately come under the political scrutiny of the Finance Ministers of the member states of the European Community. A delicate balance would need to be struck between a central bank maintaining monetary integrity and ultimate political accountability. I see no inherent difficulties in resolving that problem. One could say that the same problem exists between the Treasury and the Bank of England now, with a legislative backstop. Moreover, those who are worried about the growing power of the Bundesbank over economic policy in Europe ought to welcome the creation of a central European bank which would clip the wings of the Bundesbank.

Only this week, on the issue of monetary union, Karl Otto Po"hl, the socialist president of Budesbank, expressed his support for the establishment of a European central bank. I see Conservative Members look at each other with unease. Karl Otto Po"hl is a socialist.

Mr. Nigel Forman (Carshalton and Wallington) : He was.

Mr. Sedgemore : Was? Once a socialist always a socialist.

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Ominously for Britain, Mr. Po"hl suggested the possibility of a two-speed system for joining the ERM, with Britain in the slow lane. Surely that would be disastrous for Britain. We should throw sterling to the speculators, as the Christians of old were thrown to the lions.

What is the Government's position on the two-track approach on the creation of a central European bank? That is a serious question because the Secretary of State for Trade and Industry has suggested that we might be in the slow lane and that other European countries might go ahead with the creation of a central European Bank and Britain will be left behind. Is that view shared by the Treasury? Of equal concern is the worry, shared I am sure by many of my hon. Friends, that intolerable regional disparities in the level of unemployment, output and living standards might arise. To meet that possibility there would be a need for a larger Community budget-- at present it is between 0.5 and 1 per cent. of Community GDP--a substantial proportion of which should be devoted to regional policies to reduce those disparities.

I doubt whether many of my hon. Friends would cavil at the idea of regional planning inside the Community. I suspect that the economist Sir Donald MacDougall, who chaired the Marjolin group which considered the problem, massively overstated the extent to which the Community budget would have to be increased.

Until now the Government have made it clear that they are opposed to the type of plan I have outlined. Instead they have brought forward plans for competing currencies or currency competition in the run-up to the intergovernmental conference. In the Government's scenario, strong currencies such as the deutschmark would be attractive to lenders and weak currencies to borrowers because of the differences in their rates of interest. Currency competition would almost certainly favour low inflation currencies such as the deutschmark, not high inflation currencies such as the lira or sterling. The deutschmark is already the most widely used currency, and the unification of East and West Germany could reinforce that. Under a system of competing currencies, the common currency in the long run would almost certainly be the deutschmark and Europe would become a deutschmark zone. Unless the Government drop their competing currency idea, that is where they are leading us.

I doubt whether it is politically desirable or acceptable to other countries in the Community that we should become a deutschmark zone. The Bundesbank may not even welcome that because it would make the conduct of monetary policy in Germay even more difficult. Similarly, if sterling became the main currency, the Bank of England might not like it because the bank would have to worry first about the foreign holdings of sterling that affect interest rates and the exchange rate and, secondly, domestic holdings of sterling that affect monetary growth and domestic demand. From the point of view of the Bundesbank and the Bank of England, it would be far better to have the ecu as the single European currency.

Mr. Nigel Spearing (Newham, South) : I am following what my hon. Friend is saying with great interest and, surprisingly enough, with some agreement as to his prognostications. Whatever one calls the currency-- deutschmark, sterling, ecu or some alternative yet to be suggested--does he not agree that the engine for that and

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the economy that would probably dominate would be the German one? Although most of us--with the exception of a few backward people on the Conservative Benches--would agree on the idea of regional planning, where that regional planning takes place and of what it consists should not, according to most hon. Members, be centralised in a European capital across the water.

Mr. Sedgemore : I am pleased that I am swinging my hon. Friend slowly round to some of my arguments. He must live in the world as it is ; he cannot stop it and get off. My hon. Friend has said that Germany will be the engine of economic growth in Europe, but that will happen whether or not Britain joins the ERM or a single European currency is adopted. Why does he state that as though stating some fundamental objection to my idea? My hon. Friend is a man of tenacity and perspicacity on this issue the like of which I have never seen and I look forward to his speech.

Regional policy will be about political argument and the transfer of powers in the Community--one can transfer them up or down. If my hon. Friend wants the Commission to give some of the money to the British Government and allow them to allocate it, he must use his powers of argument. He must think of new ways in which to sort out the problems, but he should not adopt the negative attitude that somehow, because Germany has a powerful economy--that is undoubted--therefore every suggestion on the Community is flawed because of that. Surely that dominance is one of the reasons for taking some of the powers away from the Bundesbank and sharing sovereignty in Europe.

Mr. Michael Latham (Rutland and Melton) : Can the hon. Gentleman take us more into his confidence on the question of democratic control? He has said that his proposals would not affect sovereignty. Is he in favour of strengthening the powers of the European Parliament? If so, his hon. Friend the Member for Newham, South (Mr. Spearing) will have a heart attack.

Mr. Sedgemore : The short answer is, yes, I am, and I hope that my hon. Friend does not have a heart attack. I believe that some other hon. Members may develop that point, but I must limit the length of my speech.

Under the Government's competing currency proposals the situation is such that life becomes most difficult for the currency that wins the competition. It is an amazing proposal that the winner becomes the loser. The Government are apparently prepared to let sterling take the strain of that competition.

There is, of course, one other overwhelming objection to the Government's competing currency proposals : it is hard to find anyone in Europe who thinks that they are credible or desirable. In effect, Britain risks entering the intergovernmental conference naked on this issue.

The Financial Secretary to the Treasury (Mr. Peter Lilley) : Has not the hon. Gentleman read the report of the committee of advisers to the German Ministry of Finance, consisting of 30 of the most distinguished economists in Germany, which broadly endorsed the attitude expressed in the Government's evolutionary approach?

Mr. Sedgemore : I spend most of my time trying to contact European politicians. I have not read that report,

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but I have heard of it. I shall willingly give way to the Minister if he can name some leading European politicians in favour of the competing currency proposals.

Mr. Lilley : Mr. Balladur, to name but one, France's distinguished Minister of State for finances.

Mr. Sedgemore : Would the Minister like to mention two? As the Minister has enticed me, let us consider the details behind this issue. It would be an unhappy state of affairs if we went to the intergovernmental conference supporting the competing currency proposals. I understand that the Government must present their proposals shortly, possibly next week. The Minister seems to be suggesting that the policy is still intact, but if that is true, that is not the message in the Chancellor's speech to the German chamber of industry and commerce on Tuesday.

That speech made no mention of competing currency proposals. Conservative Back Benchers, having read that speech, have been gob-smacked. He spoke about monetary union, the ecu and everything else except competing currency proposals. He spoke about moving on from stage 1 of Delors, but the only way to do that is to move to stage 2, which is a staging post for stage 3. The Chancellor seems to be talking about moving on to stages 2 and 3, and in paragraph 21 of his speech he spoke about the arrangements for stage 2 of Delors. In paragraph 24 he spoke about the ecu and said :

"The third element might be to promote the use of the ecu. Can we help familiarise people more with the ecu? Can we develop ecu financial markets and techniques for central bank intervention in those markets?"

Let me repeat a question put to me by a Conservative Back Bencher this morning : what conceivable reason can there be for the Chancellor talking about the development of the ecu unless he is talking about monetary union and irretrievably locked exchange rates? I cannot understand his speech unless it is considered in that way. Having spoken about stage 2 and the ecu, in paragraph 25 of his speech the Chancellor said :

"I think that these questions and others like them must be addressed in any rational discussion on how to progress to any form of EMU. It should be possible to devise solutions that are useful in themselves, whatever the outcome of our longer term debates." That was a critical speech and I am sure that the Minister will wish to comment on it. There are two way of interpreting that speech. One is to accept the words for what they say, which is that there is a significant change in the Government's policy, that stages 2 and 3 are being thought about more seriously, and that the competing currency idea has been dropped. The other is the idea of the cynics. It is to say that it is classic British diplomacy--a stalling device--that it is the British trying to avoid the odium and opprobrium of our European partners at the intergovernmental conference.

There may be some rationale in that because some Treasury civil servants are now briefing journalists fast to the effect that the Chancellor is really a big stateman and that that is what it is all about. It is a stalling device. I ask the Minister to say whether we should accept the words used by the Chancellor or accept the briefing that Treasury civil servants are giving.

Many people will be pleased if we must accept the words that the Chancellor used in that speech because 83 per cent. of European business men questioned in a survey

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said that they were in favour of a common currency and would like to see the ecu adopt that role. Many Governments want it, but apparently not Her Majesty's Government.

Having taken up a lot of the time of the House, I will conclude with a political thought. When I began to rethink my views on Europe just over two years ago my starting point was economics. I was worried about the fact that the freeing up of global capital markets as well as changing trade patterns meant that some of the positions that I was taking were no longer credible. Nagging at the back of my mind was also a concern about where isolationism in Britain might take us. I concluded that the European Community had to be seen as an opportunity rather than as a threat. "A blinding flash of the obvious," some will snort. "An act of surrender," others will say. In the past year, events have moved on dramatically. For anyone who has been awake, the politics, more than the economics, of Europe call on us to reassess our perspectives. I have no intention today of trying to set out a blueprint for Europe. Events change so quickly that most of what one says is out of date before the breath with which it is said dries in the air. But I will end by setting out a few guiding principles and my own general philosophical approach. I do not want to see the people of Eastern Europe, who are enjoying new-found political freedoms, exploited by western capitalists, although I accept that they will need western capital. I do not want to see the countries of Eastern Europe become second-class Europeans and end up as associated members of the European Community, denied seats at the top table where the critical decisions are taken. I do want to see the countries of Eastern Europe become part of a more democratic and accountable European Community which develops new ideas on social and economic integration. I want to see them join a European Community which links global economic and environmental problems to the condition of working people in their homes and workplaces.

Proceeding by way of economic collaboration, it should be possible to create a Europe, east and west, where wealth can be shared. It is not so much that socialists and environmentalists can join together to hijack the European Community as that the EC, despite being based on laissez faire economic principles, has a natural interventionist social and political dynamic.

That, if one likes, is the contradiction of the EC. That, if one likes, is where the dialectic of the 21st century will be fought out. I do not see that dialectic ending up in crisis. Rather, it will be a way of dealing with practical problems that go beyond the boundaries of the nation state and the solutions of which therefore must be international.

The task of politicians is to bring a sense of idealism and purpose to the opportunism and utilitarianism that might otherwise dominate, to widen horizons for minorities and the disadvantaged and to protect the interests of working people.

I end where I started. Kundera once said that the struggle of the people was the struggle of memory against forgetting. Today is a day for not forgetting the awfulness of nationalism, mysticism and race--the awfulness of the Europe "des patries" followed by the awfulness of

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Stalinism in the east. Today is a day for remembering that the future does not have to be like the past. It can be better, as Tennyson proclaimed joyously :

"For I dipt into the Future, far as human eye could see, Saw the Vision of the world, and all the wonder that would be." 10.13 am

Mr. John Bowis (Battersea) : I congratulate the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) on his good fortune in the ballot and on the way in which, using his usual elegant wit, he entertained us and on occasions persuaded us to agree with the odd bon mot, to borrow a European phrase, that he came up with. The hon. Gentleman said that once a socialist, always a socialist. I presume that that will be the motto on the frontispiece of the Labour party's manifesto at the next general election. He drew out a soupcon of debate from his hon. Friends, which persuades me rather of the truth of the adage that old socialists never die, they just feud away.

I look forward to later contributions from the Front Benches, and I apologise to the hon. Member for Islington, South and Finsbury (Mr. Smith) that I shall not be present to hear his summing up as I must attend a constituency engagement. Also, I fear that I shall not be present to witness the seamless robe way in which the debate moves on to deal with the Church and state in the next motion.

I perceive a few inconsistencies in the motion, no doubt not because of any failing on the part of the hon. Member for Hackney, South and Shoreditch but perhaps because of a failing on the part of his hon. Friend the Member for Islington, South and Finsbury. When I saw the reference in the motion to a single European currency and the claim that

"the interests of the British people will be served best in the future by the positive approach contained in Labour's new policies" I went hot foot to examine what Labour's new policies, as contained in "Back to the Future", or whatever it is called, actually said. In that document I found not quite the hon. Gentleman's hopes as expressed in his motion. It said, in more hesitant terms : "Joining the ERM is no panacea for Britain's economic problems a Labour Government will negotiate Britain's entry at the earliest opportunity on the basis of the prudent and reasonable conditions which we have frequently outlined."

Presumably as part of wanting a European currency, the hon. Gentleman would have to have a central bank and so on, but the document continued :

"we would oppose the proposals for an all-powerful, but unaccountable, European Central Bank, as outlined in the Delors plan we would not advocate an independent Bank of England."

The speech of the hon. Member for Islington, South and Finsbury should be worth waiting for, to see how he reconciles Labour's policy with the speech of the hon. Member for Hackney, South and Shoreditch, whom I congratulate on bringing this subject forward for debate, for we must examine where the European Community is going in its politics and economics.

Those of us who have long supported the Community believe that its aims are the preservation of peace in western Europe, the bringing together of former warring nations and the furthering and advancing of prosperity through economic co-operation and harmony. I have always believed, further, that, at least in the past--perhaps

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this is changing in the way that the hon. Member for Hackney, South and Shoreditch said--we have had the Community to protect us from some of the more expansionist threats from the east and some of the cultural threats from the west--from Moscow or from across the Atlantic. But the hon. Gentleman is right to say that Europe has been changing and that we must adapt, as must Europe and the Community also adapt.

I am with the hon. Gentleman in his references to the ERM. I have long believed that it would be right for Britain to join as soon as possible, and for me that is sooner rather than later. The experience of France and Italy shows that it has been helpful in reducing their inflation rates to the levels of Germany. The other side of the coin, Spain, proves that such a step is not always a panacea. That country's inflation and interest rates have gone up. But on balance it would be right for us to join as soon as possible and to benefit from the stability that that would give us.

I part company with the hon. Gentleman on the question of a single currency. I see its advantages in being simpler to manage and to trade, but the only time a single currency would be worth while would be when it was less inflationary than the strongest currency in its bounds. The strongest currency is obviously the deutschmark, as the hon. Member for Hackney, South and Shoreditch conceded. I do not believe that a single European currency would be as strong and stable as the deutschmark.

Delors said that his system would be committed to price stability. In that, he mirrors the German experience and law, but he also reflects the fact that the German psyche has always, because of its history, been anti- inflation. That is not true of many other countries that would join that single currency and come within its control. Each country's representative would have a view on what the central policy of a central, single currency should be. Just as we have seen the trade-offs that come from the political PR systems of countries in Europe, we would inevitably see trade-offs in terms of the currency's direction rather than the benefits from the competition that exists in a multi-currency system which seeks to meet the achievements of the strongest currency, rather than drag that currency downwards.

I wonder how much the independence of banks is a mirage. Even when the Bundesbank in Germany was considering exchange rates with the ostmark, Dr. Otto Po"hl's determination not to have parity was soon overridden by the political will of the German Government. I do not blame them for that, but I doubt whether independence really exists. I am looking for a Europe that is flexible. The hon. Member for Hackney, South and Shoreditch was right to raise the issue of a new and widening Europe. We have a sort of Europe of "Jeux sans frontiers". Unfortunately, that phase is too often translated not just as, "It's a knockout" but "It's a lockout" in the British view, and perhaps the socialist view, of Europe. We must ensure that we are without frontiers in our ambitions to bring in other countries when they qualify and meet our requirements of democracy and stability. We must not allow economic or political obstacles to stand in the way of that wider membership.

We hope that East Germany will soon be within our Community. However, it is not just the Germans within the German-speaking community that we want to see in our Community. Why are we not doing more to encourage

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Austria to meet our requirements--followed perhaps by Hungary and Norway, which might be followed by Sweden, and perhaps even Iceland and Finland? When we look further we see other countries that might one day seek to join, such as Yugoslavia, which is beginning to disintegrate as a single nation. The Boznias, Crotias and Slovenias may all become capable of joining us, with separate seats at the table. Then we start to see the implications for the currency, the economy and the political stability of our Community.

Sir Russell Johnston (Inverness, Nairn and Lochaber) : I thank the hon. Gentleman for giving way, and perhaps I should have stood up a little earlier when he referred to Austria because I want to ask about that. Does he agree that Austria could enter almost forthwith, and that it is wrong for the Government to seek to couple Austria and Turkey?

Mr. Bowis : The hon. Gentleman slipped in Turkey. I hope that Austria will be ready to come in sooner rather than later. I expect Austria to qualify very soon. Turkey is a different matter. We must ensure not only that it is economically stable, but that its human rights record and other democratic factors continue to improve to meet our requirements.

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