---

European Commission

I agree with my hon. Friend. My plan B would be to retain the strength of the democratic Parliaments of the member states and get them to work co-operatively for mutual benefit. Democratic power would have to be retained at the nation-state level. In other words, they would co-operate when necessary and when mutually agreed for mutual benefit, but they would not be compelled to do so or to cede power to the centre of Europe and have our nation-state Parliaments overridden by the European Union. That is my position. I speak—as I have many times—as a European. Everything about me shrieks Europe. I am a European by ancestry. The language that I speak and the ones that I try to speak are European. My enthusiasm for the arts, my love of geography and everything else are related to Europe. The European Union is a political imposition on Europe; it is not Europe. I resent the use of the word ““Europe”” for the European Union. Europe covers countries as far afield as Russia—as far as the Urals—Norway, Switzerland and wherever. It is bigger than the European Union, and the European Union is a political construct of which we must be wary. As I say, if there is a no vote, we will go back to the status quo, and things will not be very different from now. However, they will be significantly different if the vote is carried. I was talking to some visiting French business men in a Committee room last week. They were from the nuclear industry and were fairly conservative people. When I talked about the economy, they were shocked at my views. It was almost as though economics did not count in Europe and the union was a political concept or idea. I said that, if it was such a political idea, why was the European Union so concerned to exercise economic control, to construct the single European currency and to have a European Central Bank that sets interest rates independently of any democratic control? I said that it was about economics and that economics is driven not by the interests of working people, but by the interests of big business and global corporations. I think that I made my point, but they were rather shocked that I emphasised economics. We are possibly on the verge of very serious economic times. The credit crunch, the sub-prime lending crisis and rising oil and food prices are leading us towards a great hole in consumer and economic demand that could cause a recession of quite serious dimensions. We in Britain are more exposed than the continent of Europe. Nevertheless, all of us will be affected by some kind of economic downturn. It was just at these times that Keynes and others—Keynes was the greatest of them—said that Governments should borrow and spend to counter recessionary forces. Yet, at the moment, we are being told by the European Union that we must not borrow; we must not let our debt get out of hand. Debt in Britain is not excessive compared with some other countries and with what we have had in the past. If we are going into a serious recession, we should expect to borrow. I do not think that we want the European Union telling us, ““You have to tighten your belt and spend less.”” That would drive us deeper into recession, and we do not want that. We want to spend more to counter recessionary forces. If there is a problem with debt, the logical way to deal with that is to raise taxes, but not tax the people who spend money, but the people who have lots of money. Those with an elementary knowledge of economics understand that, if we tax very rich people who tend to keep their money in banks, it will not have much of a deflationary impact on the economy, but if we tax poor people, it will. It is economically beneficial to redistribute income from the rich to the poor in difficult economic times. Poor people, by the very nature of their lives, spend every penny that they get on surviving. Therefore, they keep demand going. Rich people, even possibly the better-off Members of Parliament, will not be too affected by an increase in taxes. My suggestion for increasing taxes in Britain does not reach down as far as the incomes of Back Benchers—possibly Ministers, but not Back Benchers. I will have to check that out. I have dealt with fiscal policy, borrowing, debt and public expenditure, and the other area is interest rates. The European Union is still dominated by deflationist monetarists who control the European Central Bank. They are talking about keeping interest rates high to squeeze out inflation. When an economy goes into serious recession, inflation is not the problem. The problem is generating demand to survive. Inflation will automatically come down if we go into a serious recession; prices will fall. If we try to counter inflation, even in relatively stable economic times, we have to see from where the inflation comes. For example, it could be generated by external forces, such as the price of oil. In that instance, if we force an economy into recession to squeeze out inflation, we would destroy the internal economy to deal with something that is beyond our control—the price of oil. Inflation is not the serious threat that faces Europe at the moment; it is recession. At a point—it may be a high point—the price of oil will level off. It may be $200 a barrel, but it will level off. It is then that the additional inflation eases off. Provided that the internal economies are kept strong and that sufficient product is coming through, inflation will not be a serious problem internally. If, however, by deflating the economy like mad, we destroy the internal economy, when we come to reflate, there will not be enough productive capacity to meet demand. That is when we would get inflation again, and it would be demand-driven inflation rather than cost-driven inflation. I do not want to give a lecture on economics, but the European Union and our Government should be worrying about recession and not inflation. I hope that the European Union will think again. Even now in Britain, we are considering whether or not to raise interest rates. I must admit that I went hairless the other day—as hon. Members can well see—at the thought that we might have three more interest rate rises in the pipeline from the Monetary Policy Committee of the Bank of England. I do not think that that will happen. Within a few weeks or months, the economy would be in such difficulty that we would not be raising interest rates; we would be lowering them, which is what I suggested in Treasury questions last week. There are other aspects to the annual policy strategy report. My right hon. Friend the Member for Rotherham (Mr. MacShane), who is not in his seat at the moment, talked as though the budget was the major problem. It is not the major problem, but it is something that we must address and something that is ill-designed and unfair to Britain. I have suggested how it should be seriously reformed. My hon. Friend the Member for Linlithgow and East Falkirk (Michael Connarty) is chair of the European Scrutiny Committee, of which I am happy to be a member. He suggested that we should be more proactive in policy. I agree with him, and I have been proactive. I have probably spoken at 80 or 90 European Standing Committee sittings over the past 11 years. My hon. Friend the Minister for Europe was the Whip on those Committees. I remember him urging me not to speak too long, so that everyone could go home early. I did have my say, and I made my point. One of the points that I repeatedly made was that, if we must have a European budget that has receipts and disbursements, it should be related to the relative prosperity of the member states, so that the rich ones are net contributors and the poor ones are net recipients, and it is all done on a fair basis. The common agricultural policy completely distorts that. If we took CAP out of the equation and repatriated it to member states, the distortions in the budget would disappear. We could have a budget that was broadly related to the relative prosperity of different nations. There would be a redistribution of income between member states. The amounts concerned would be modest—perhaps 0.5 per cent. of gross domestic product or something—but the process would work well and those concerned would be happy with it. It is foolish, misguided and ill-designed for the whole budget process to be distorted by the CAP. Some countries are big net contributors when they should not be, and others are big net recipients when they should not be.