Section 5 of the European Communities (Amendment) Act 1993

William Cash Excerpts

Wednesday 27th April 2011 Commons Chamber

[Mr Hoban]

The hon. Gentleman makes an important point. Under the previous Government, we saw a further deterioration in manufacturing and an overreliance on the financial services sector, creating some of the imbalances that led to the deepest recession since the 1930s. Part of the challenge faced by the Government is how to tackle those imbalances and move to a more broadly based economy, and I shall touch on that later in my speech.

We must remember that sustainable economic growth across Europe is vital to the success of the British economy. Having the right warning mechanisms in place, underpinned by sound data, will help to identify future economic crises that could harm the UK economy. Even though we are not part of the single currency and will not be joining it in the lifetime of this Parliament, we cannot consign ourselves to be bystanders in the debate.

[Mr William Cash (Stone) (Con)]

I noticed the Minister use the expression “we will not be joining the single currency in the lifetime of this Parliament”. I thought there was a clear commitment that we were never going to join the single currency.

[Mr Hoban]

As I am sure my hon. Friend is aware, I am following what is set out in the coalition agreement. Like him, I do not anticipate that we would seek to join the euro.

Tonight’s debate is a consequence of the stability and growth pact. Since 1999, as a result of the pact, the Government have reported to the Commission on the UK’s economic and budgetary position and our main economic policy measures. I want to reassure the House, however, that the UK is not subject to sanctions under the stability and growth pact—the Treaty is clear that they apply only to euro area countries. The EU can make recommendations as regards our budget, as can other international organisations such as the OECD and the IMF, but, crucially, we are under no obligation to take action and we are not subject to any sanctions by virtue of our opt-out. Any recommendations made will remain just that—recommendations.

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[Mr Hoban]

I am rather surprised that the hon. Gentleman has not congratulated the Government on taking the tough action that put the recovery on track and made sure that we have lower interest rates than Greece, Ireland and Portugal. That is a consequence of the actions that we have taken—actions that the Opposition would not take. We are tackling the legacy that they left. The problem is that the scale of the legacy is huge. That makes the recovery challenging. Today’s figures demonstrate that we are making good progress on that.

To support the economy and to continue the growth in the private sector, my right hon. Friend the Chancellor set out a new economic strategy as part of this year’s Budget. The strategy has four ambitions at its heart—that Britain will have the most competitive tax system in the G20; that it will be the best place in Europe to start, finance and grow a business; that it will be a more balanced economy, by encouraging exports and investment; and that it will have a more educated work force that is the most flexible in Europe. In pursuit of these objectives, we have announced further cuts to corporation tax, taking it down to 26% this year and 23% by the end of this Parliament.

This is alongside our decision to introduce a highly competitive tax rate on profits derived from patents and our fundamental reform of the complex rules for controlled foreign companies, making them much more territorial and making the UK a much more attractive place for businesses to locate, ensuring that we have a far more attractive tax system than either Germany or France.

This year’s Budget also deals directly with the challenge of education and youth unemployment, which has been rising steadily for the past seven years. Instead of 20,000 young people benefiting from our new work experience scheme, as we originally planned, we will increase that number fivefold to 100,000 places over the next two years. Although in Austria and Germany one in four employers offers apprenticeships, in England fewer than one in 10 does so. That must change.

That is why last year my hon. Friend the Minister for Further Education, Skills and Lifelong Learning published a skills strategy and confirmed the largest ever expansion in adult apprenticeships. At the Budget we committed to funding another 40,000 apprenticeships for young unemployed people. That brings a total of 250,000 more apprenticeships over the next four years, as a result of this Government’s policies. This will help to ensure that all parts of the country have access to a better educated work force.

This year’s Budget will help to create a more balanced economy, tackling the imbalances of the past that undermined the economy and led to the longest and deepest recession since the war. This year’s Budget gives support to the private sector and hope to those looking for work, and will stimulate job creation across Britain.

[Mr Cash]

One word that the Minister has not mentioned is “deregulation”. In view of the fact that 4% of GDP is lost as a result of European regulation, does he agree that we need to override European regulation, such as the working time directive, when it has the effect of increasing unemployment and preventing businesses from growing?

[Mr Hoban]

My hon. Friend makes an important point about the burden of regulation on business, and that is why in the Budget my right hon. Friend the Chancellor set out our plans for a moratorium on new regulations for micro-businesses and for start-ups, why the Prime Minister, along with several other European leaders, called for plans to cut the burden of European red tape, and why the Prime Minister has also required José Barroso, the President of the European Commission, to deliver on his commitment to reduce the cost of red tape for business by 25%.

We need to work on those issues to tackle regulation that hampers growth not just here in the UK but throughout Europe, because regulation is a Europe-wide issue. We need to tackle and reduce that burden if the eurozone is to grow at the levels that we expect to see in Asia and in the far east.

As I said to my hon. Friend, this Budget tackles regulation and introduces a moratorium, and that is why it stands firm on our plan for recovery. It is good for business, it is good for growth, and with the approval of the House it will form the basis of the information that we provide to the European Commission. I commend this motion to the House.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Many hon. Members might wonder why we are having this debate tonight. It is an incredibly important debate, but they might be forgiven for not having spotted the small print on, I think, page minus 2 under the ISBN number of the Red Book in probably seven or eight-point font, where it points out that the UK is required to submit to Brussels an annual convergence programme so that it can monitor our economic policy.

I am, however, grateful to the Financial Secretary for having written to me to draw attention to the debate this evening, the papers for which were published only at lunchtime yesterday. In fact, the motion appeared on the Order Paper only yesterday, too, and I am surprised about that, because in the parallel debate a year ago following the 2010 pre-Budget report, the hon. Member for South West Hertfordshire (Mr Gauke), now the Exchequer Secretary, then speaking from the Opposition Benches said:

“It was also very difficult to locate the report. I obtained a copy last week, but it was not available in the Vote Office yesterday. This is a point that has been made many times before”. —[Official Report, 10 February 2010; Vol. 505, c. 947.]

I am surprised that the Government have not really listened to their own Members when it comes to flagging up the importance of this particular debate, but, given that we have a motion asking the House to note “with approval” the Government’s assessment of the economy, and to conform with the requirements laid down in the various European Union treaties, I am sure that it is pure coincidence that Ministers did not flag it up or put bells and whistles around it to draw its attention to many hon. Members.

[Mr Cash]

rose—

[Chris Leslie]

But I am quite pleased that the hon. Gentleman keeps his eye on these developments.

[Mr Cash]

We certainly do our best on the European Scrutiny Committee, which included our making sure, by the way, that this debate took place on the Floor of the House by objecting to the motion to refer it to a Committee. I thought that we might just as well get it on the Order Paper.

[Chris Leslie]

I am very grateful for the hon. Gentleman’s work on the European Scrutiny Committee. This is, as I say, an incredibly important debate, and more hon. Members ought to be aware of it.

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[Chris Leslie]

We have the opportunity to divide the House on this matter, although I think that it would be a deferred Division; obviously, that is a matter for Mr Speaker.

As we go through the details of the document, we see that there are problems in it. Page 17 says that the economy is forecast to grow by 1.7% in 2011—lower than the forecast in the June Budget. Is that forecast sustainable? The Government and the Office for Budget Responsibility revised down their forecasts for growth in June and revised down expectations in November. The OBR then revised down expectations for a third time after the March Budget.

The answer to the question that I asked the Minister earlier—what was the OBR’s prediction for the first quarter of this calendar year—is 0.8%. Yet today the Office for National Statistics gave a rather comatose and limp growth rate of 0.5%. That comes on the heels of a growth rate in the fourth quarter of 2010 of minus 0.5%. Essentially, there has been a zero rate of growth—flat-lining—over the past six months.

As Stephanie Flanders, the BBC’s economics editor, said, it is

“depressing to think that the economy is treading water…in a normal recovery we would expect to see a lot of momentum at this point”.

Chris Giles, economics editor at the Financial Times, said that for there to have been any credible claim to a return of underlying growth, this quarter’s figure should have been 0.7%. He went on:

“Add in one quarter of the growth expected in 2011—about another 0.5 per cent—and the figure necessary to show the economy growing at an average pace in the first quarter is at least 1.2 per cent.

Arguably, it should be even higher, at somewhere about 1.7 per cent, if the underlying stagnation in the fourth quarter of 2010 has been recovered in the first quarter of this year.”

We are a long way from that, and that is a serious problem. Yet the Chancellor seems to think that we are on the right track; as somebody said today, if he thinks that, he needs to chuck away his satnav and get a new one.

The GDP growth figure of 0.5% for the first three months of this year merely replaces the loss of output in the snowbound fourth quarter of 2010 and suggests that the economy has no underlying momentum at all. The chief statistician at the ONS said today that we had been “on a plateau” for the past six months. Tony Dolphin, the chief economist at the Institute for Public Policy Research, says that a 0.5% fall followed by a 0.5% bounce-back is equivalent to two successive quarters of zero growth—

“as close as it is possible to come to a recession without actually being in one”.

Yet the Prime Minister says that this is “good news”—those were his words as he trumpeted this resounding success at Prime Minister’s Questions today. Even the Minister said, a matter of minutes ago, that it is good progress. I am afraid to say, however, that the document we are being asked to approve is already out of date, even though it was published only 24 hours ago. It is a bit of dead parrot. It is no more, it has ceased to be, it has expired; it is an ex-convergence programme.

It is not good enough if the Minister cannot even produce a document when he gets advance notice of ONS growth statistics that matches the realities of the economy rather than the forecasting ideas that are dreamed up in the Treasury. That is a sign that the Government do not understand the importance of growth in our economy, especially when today’s statistics showed that construction has fallen back by 7% over the past six months, with total production already falling back even from the last quarter before Christmas. Government cuts have not yet started in earnest, and the VAT increase is already biting hard.

What are the prospects for business growth? On page 14 of the document, the Treasury says:

“Credit conditions have shown signs of stabilisation”.

That is certainly not the experience of small and medium-sized enterprises: lending to businesses is in an atrocious state. It goes on to say in paragraph 2.43:

“however, credit conditions for smaller firms remain tight”.

That is an exceptional understatement. The Bank of England’s lending report shows that lending to SMEs fell by a further 3% in February. That is echoed by the British Bankers Association’s growth rate statistics on lending to small businesses, which cited a figure of minus 6% in December. So much for the much-vaunted Project Merlin. Yet the mark-ups that small businesses have to pay for loans are widening, and the banks are charging small businesses even more even though less and less lending is available. We have a serious systemic problem with our economy. Underpinning the difficulties with growth are the factors that businesses need in order to fire up the economy, and they are going wrong.

We also have to look at the Government’s failure on employment. Page 84 of the convergence programme document says:

“In line with a weaker outlook for output growth, we expect employment to be lower than forecast in November.”

The OBR predicts that unemployment will go up by 200,000 as a result of the Government’s policies. If each unemployed person costs the Exchequer about £7,800 in welfare costs and lost taxes, that could represent a loss to the Exchequer of more than £1 billion—money that the Exchequer should have coming in that is going the wrong way. In addition, inflation is undermining Government spending plans, as the document admits in terms of VAT fuelling inflation, and it is forecast that borrowing and debt will be higher than predicted in June. As a consequence, the interest that we will need to pay on our borrowing will be higher because of the inflationary costs of social security expenditure.

[Mr Cash]

I have no doubt that the hon. Gentleman has looked at the comparison of unit labour costs throughout the whole of Europe. It shows that in the past 10 years Germany’s costs have increased by only 2% whereas almost every other country’s have increased by massive multiples of up to 35%. Does he accept that one of the real reasons Germany is predominating in the European economy includes, in particular, the fact that its labour costs are so low, which means that it can compete in the BRIC countries, including India, China and the rest?

[Chris Leslie]

There are several factors underpinning the German economy. The Germans do not pursue the same degree of hard and fast austerity that we are pursuing, they have a different approach to productivity, and they are achieving higher levels of growth. Our economy needs a pro-growth strategy. I do not say that as a whim—it is a hard-headed credible necessity for reducing the deficit and getting the economy moving again. Without growth, the Treasury will be losing revenue.

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[Chris Leslie]

It is actually based on common-sense economics. I regret that the Government cannot see that. Unfortunately, I think that they will rue the day that they neglected growth in the economy. As we know, there is anxiety in the Treasury at the flat-lining, almost comatose nature of the economy. We hope sincerely that it picks up through the next quarter, but many people predict choppy times in the second quarter of this calendar year. I refer the hon. Gentleman to the paradox that I spoke about: pursuing the austerity approach too hard and too fast undermines growth and pulls from under the economy some of the key drivers for future prosperity that support it. Cutting too far and too fast is bad not just for the economy, but for deficit reduction strategies.

The Government’s spending plans are already coming unstuck. I will wind up with this point because I know that a lot of hon. Members want to speak. On tuition fees, which we debated earlier, we know that the cuts to higher education budgets will mean that universities will charge the highest fees, which will result in the ballooning of student loan pressures and the creation of a funding shortfall. Where will that money come from? We know that the Government have U-turned on school sports and that, when it came to the crunch, even the Financial Secretary had to U-turn on the financial inclusion fund. We are glad that he did so, but it changed the spending trajectory. On forests and on any number of other spending plans, when the rubber has hit the road, the Government have been unable to fulfil many of the so-called spending cuts that they promised in their much-vaunted June Budget.

[Mr Cash]

Does the hon. Gentleman concede that, leaving aside the question of cuts for a moment, the motor for an economic revival comes from growth, which in turn can come only from private business and private enterprise generating the taxation to pay for public expenditure? Without that, there is no public sector.

[Chris Leslie]

I agree with the first part of the hon. Gentleman’s point. Of course we need a pro-growth policy, and of course the private sector has to be the engine of that. However, he suggests that the Government somehow have no role to play in encouraging and fostering growth, and that is where we differ. The Opposition believe in supporting firms in moving forward into prosperity. The laissez-faire attitude of the Conservative-Liberal alliance has moved us into wholly different terrain and proves that it does not have a credible fiscal stance.

Unfortunately, the convergence programme is a hollow document that is already out of date. Its predictions are not probable or plausible, and for those reasons I urge Members to reject the motion.

[Alec Shelbrooke (Elmet and Rothwell) (Con)]

I start by drawing on the last intervention by my hon. Friend the Member for Stone (Mr Cash). He made an important point, and it was the one that I made last night. Government money is not our money, it is the public’s money generated by the private sector. We cannot simply say that we should carry on pouring in money, because it is not our money. We must think about where it comes from.

The hon. Member for Nottingham East (Chris Leslie) said that if certain actions had not been taken, an extra £6 billion would have come in to the Exchequer, but in our emergency Budget we cut the deficit by £6 billion. If we had not done that, there would not have been any extra money, would there? We would have borrowed an extra £6 billion instead. We would have been borrowing money, churning it out, collecting it back in and saying, “What great money generation”. We would just have been turning money around. We can get money coming in to the Exchequer only through growth, and that can occur only if the private sector is in a credible position so that it can move forward.

The Opposition’s comments are interesting, because there is a paradox in that they paint a gloomy picture but meet it with glee and struggle to keep a straight face. Of course, we know that if we had followed the previous Chancellor’s spending plans, we would have been cutting £7 for every £8 that is being cut now. The margins are small. Let us not get into a discussion about the idea that if the Government’s actions had not been taken, a further £6 billion would have come in. We cut the deficit by that amount in the emergency Budget, so there would not have been any extra money. The money that we borrowed would just have been churned out and collected back in, which would have done nothing to stimulate the growth of the economy. I agree with the hon. Member for Nottingham East that the growth figures are small, but they are growth figures. He says that they may be flat, but we know that things can be choppy. The point is that we are growing and moving forward.

Let us come back to tonight’s debate and the history of the Council of the European Union. Back in July 2008, the Council of Ministers decided that the UK had an excessive deficit and asked it to correct that by the financial year 2009-10 at the latest. In April 2009, the Council concluded that the UK had failed to correct its excessive deficit within the time set. In December that year, it adopted a recommendation that the UK end its continuing excessive deficit by the financial year 2014-15, by bringing it below 3% of gross domestic product. In 2009-10 it was at 11.4% of GDP, but the convergence document now predicts it to be at 2.6% of GDP.

That is in stark contrast to the Opposition argument that it is unnecessary to make cuts and that we should continue as before. I shall tell the House later how I actually feel about the EU’s interference in such matters, but people outside this country were saying, “You are spending too much; you need to make those changes,” and we are now doing so. Whether we should have to do that for the EU is a slightly different debate, and my hon. Friend the Member for Bury North (Mr Nuttall) was right to say that we are using parliamentary time and publishing documents containing information that the EU could quite easily find out for itself. That adds to the already bloated EU system, and perhaps indicates why it asks us for a 5% increase in its budget, which is an absolute disgrace at times of austerity.

The hon. Member for Glasgow South West (Mr Davidson) spoke of the imbalance of trade with the German economy. The German manufacturing economy is a powerhouse of Europe, and as my hon. Friend the Member for Stone outlined, we have a very low manufacturing base. The picture that that paints is that economic integration in the EU is not possible with sovereign countries generating high GDP growth and trade imbalances. For integration, countries must move to one common taxation policy. That, if anything, is proof that the euro is leading to a common taxation policy and a loss of fiscal sovereignty.

[Mr Cash]

As my hon. Friend may have noted, I raised that question with the Prime Minister earlier today in relation to voting against the provisions for a corporate tax base for the whole of Europe. That decision will in fact be made unanimously, and we can get rid of it with our veto. I did not get an answer from the Prime Minister, and I hope my hon. Friend continues to urge against having a tax system imposed upon us by the rest of Europe.

[Alec Shelbrooke]

My right hon. Friend the Prime Minister has a very pragmatic view on such things, and I am sure he took great note of my hon. Friend’s question. I am also sure that the Prime Minister will listen to the mood of the country and ensure that the EU does not move towards such a common economic base.

This is crux of the matter: we are publishing documents tonight to pass back to the EU that show that the UK is in compliance with the rules. Those rules mean that we could qualify for the euro. People have often asked, “With the pound so close to parity with the euro, why don’t we join?” but we will not join because we will not fudge the figures just to get into the euro—not that we want to join—[Interruption.] Please! I would not want anyone to leave the Chamber thinking that I am pro-euro, because I certainly am not—perish the thought.

To qualify for the euro, countries must have a budget deficit of 40% of GDP and they must borrow no more than 3% of GDP annually. We know that the Italians fudged that. That is one reason why the euro is in the mess that it is in, and why it is nowhere near competing with the US dollar, or indeed the Chinese currency, in the way that people thought it would. The fact is that if the EU wants to have a strong economic case, it must go for full monetary union, which is totally unacceptable for sovereign countries.

As we know from the treaty of Rome, the original European partnership of six nations was set up to try to prevent further wars in Europe, to bring peace to the European nations, and to get everybody trading together as one bloc. That was the vision. However, I do not think that the rise of far-right parties across Europe and the increasing moves down the federalist route are coincidental. People feel that they have lost their sovereignty and identity. If the EU moves forward to a full, integrated economic policy, that will be the end of the EU, because people around Europe will vote in extremist parties to try to reclaim their national identity. I say that as a warning, with no joy. I am probably one of the more dove-ish Government Members when it comes to violence or military matters, but I fear where those moves could lead.

The Opposition’s main argument this evening has been: “You’ve got your economic policy completely wrong. You could have had more money coming to the Exchequer.” However, they have forgotten that the money coming to the Exchequer was the money they printed, pumped out and brought back in before saying, “Oh, look at all the money we’ve generated!” I do not think so. This is about creating growth, and in the document before us, an independent body has said that the Government’s policy is correct and in line with what we want to achieve, which is what the previous Government singly failed to achieve despite the warnings in December 2009.

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[Mr William Cash (Stone) (Con)]

It will be useful to remind the House of what section 5 of the European Communities (Amendment) Act 1993 actually says. Some of us were here in 1993 during the Maastricht debates, and it was rather an interesting moment when the only piece of reality in the whole of that Session occurred. That was when an attempt was made to restrain the movement towards a European Government. Section 5 states:

“Her Majesty’s Government shall report to Parliament for its approval an assessment of the medium term economic and budgetary position in relation to public investment expenditure and to the social, economic and environmental goals set out in Article 2”—

they are pretty extensive—

“which report shall form the basis of any submission to the Council and Commission in pursuit of their responsibilities under Articles 103 and 104c.”

What this really boils down to is that, in order for us to be able to continue—leaving aside the opt-out from the euro—we effectively have to comply with the convergence criteria and other criteria that are laid down by the European Union. Effectively, leaving aside the question of the European stability mechanism—my hon. Friend the Member for Elmet and Rothwell (Alec Shelbrooke) knows that I totally agree with the extremely important point that he made earlier—the bottom line is that we have been moving inexorably, regrettably and avoidably towards deeper and deeper European integration, with more and more requirements and obligations being imposed on us.

As Chairman of the European Scrutiny Committee, I and other colleagues here tonight—my hon. Friends the Members for Daventry (Chris Heaton-Harris) and for North East Somerset (Jacob Rees-Mogg), and the hon. Member for Luton North (Kelvin Hopkins), a distinguished member of the Committee from the other side of the House—know the sheer, massive extent of the invasion and the vast range of impediments that are put in our way as a result of decisions taken not by this Parliament but by other countries, by the European Commission and by the European institutions. So this is an important debate, and the Minister will understand why I objected to the idea that it should be shunted off to some innocuous Committee, well controlled by the Whips, without having any real opportunity for the whole House to participate.

I can make my points briefly. Some have already been made and others I have made myself in the past, so I do not need to elaborate on them. First, I very much agree with the suggestion that this undemocratic process affects the daily lives of the people of this country and inhibits our ability to grow our economy, particularly when at least 4% of our gross domestic product is lost through excessive European regulation of small and medium-sized businesses. I find it utterly absurd—it is incomprehensible to me—that the Government cannot simply say, “Look, we’ve tried. We’ve gone ahead. We’ve tried to negotiate, but they are not listening. We are going to have to override the European legislation.” I think it negligent not to do so.

I received a letter from the Prime Minister only a few days ago, reminding us that the European Council

“agreed on the need for robust actions to support growth”.

He went on to refer to reducing

“the overall burden of regulation including exemptions for micro-enterprises from future regulations”.

In my right hon. Friend’s absence, I have to say—he will know that I would say it anyway—that “future” regulations are not the issue. The real question is about existing regulations. I do not need to go through them all again—I have written pamphlets about them, as have many others—and we know that there is a vast array of completely negative regulations that cause a vast amount of difficulty for small and medium-sized businesses. We are not going to achieve the private enterprise that will be needed to pay for the public sector that is needed unless we get out of that vicious circle. That is point No. 1.

Point No. 2 is that the consequences of not having sufficient growth and of having the deeply regrettable legacy of the deficit will mean that riots and protests—not only in other countries, but in our own—will grow as the pain bites into the economy and into people’s daily lives. This will lead to an increase in the potential for parties of the far right to gain traction. I do not think that the policy pursued on the stability and growth pact can be described as anything other than a disaster area because there has been no stability, no growth and no pact. I wrote an article about that in The Times five or more years ago, but it is exactly the same now. Nothing changes. That is terribly depressing, which is why we must have the political will to do something about it.

The Europe 2020 strategy is another re-run of the vast amount of verbiage that accompanied the Lisbon agenda, which those involved had to admit was a complete disaster. It is words, words and words; it is nothing to do with the practical question of generating growth. I mentioned Brazil, India and China earlier. The plain fact is that we have to compete with these other countries and it is impossible to do so when looking at the question of unit labour costs in those countries and then looking at the European Union and noticing that Germany had an increase of only 2% in the last 10 years, compared with 30% in most other EU countries. We are in a completely impossible situation. I say this with the greatest respect to my hon. Friend the Financial Secretary, but I did not hear anything in his speech to respond to this situation except for the fact that he said we were getting close to achieving the parameters laid down by the EU for the excessive deficit procedure.

Let me ask a question that I asked before the general election and again during it. It is simply this: what is the true level of our debt? Suppose that the Chancellor of the Exchequer had risen to make his Budget speech in the House the other day and said, “The first thing I must tell the House is that we will have to knock £6 billion off the figures that I am about to announce because we will be bailing out Portugal—and, by the way, our budget contribution to the European Union will rise to £10 billion, so we had better start factoring that in as well.”

Some Members may not know—I do not think many people do—that a spat is going on between the Office for National Statistics and Eurostat about the formulation of our figures in relation to the deficit. I am looking into it, but it is the sort of thing that really troubles me. If we do not get the figures right, and if the Eurostat figures are imposed in a way that makes it difficult for us to accord with the parameters of the rules, that will be another matter that should concern us.

There are many other issues that I could raise, but let me end by dealing with the question of looking to the future. The plain fact is that Germany has now taken pole position in the European Union. The European Central Bank—which has not been mentioned tonight, and to an extent I understand why—has been more or less working in a German environment, if I may put it in those general terms, and has become the owner of vast quantities of bad assets. Another problem is being stoked up there. As was pointed out in a very interesting article in The Economist a few weeks ago, all that is part and parcel of Germany’s pole position at the heart of Europe and also the heart of the problem itself. We cannot afford to work on the basis of a system—to which the Government have foolishly agreed—in which we would not be isolated, but would be engaged in the process of a two-tier Europe because we had agreed to a treaty that will have a serious adverse effect on us. We must renegotiate these treaties and return to a European Free Trade Association-type arrangement, so that we have independence and, with it, the ability to deliver an economy that the British people deserve.

[Several hon. Members]

rose—