Tribune,
6 December 1991
Labour's
leading Euro-maverick is the veteran Peter Shore. Paul Anderson asks him what
makes him tick
No one
could accuse Peter Shore of inconsistency on the European Community. He was one
of the most prominent Labour opponents of British entry into the Common Market
in the early seventies and one of the most senior cabinet figures to call for a
"No" vote in the 1975 referendum on EC membership.
He has
stuck to his guns ever since, consistently railing against what he sees as the
absurdities of the Common Agricultural Policy, the wastefulness of the Brussels
bureaucracy and, most crucially, the threat to British sovereignty from
creeping European union.
In
recent months, he has been by far the most outspoken Labour critic of the
direction the EC has taken in the run-up to next week's Maastricht summit,
which – John Major willing – will result in agreement among the EC's 12 member
states on economic and monetary union (EMU) and European political union
(EPU).
Shore's
willingness to ally with right-wing nationalist Tory anti-federalists has
earned him fierce criticism from his colleagues on the Labour benches. But,
although he shares many of the dissident Tories' worries, the focus of his
concern is different. Shore is an old-fashioned expansionist
Keynesian
who sees the nation-state as the main instrument of economic policy. Far from
singing the praises of "sound money", he wants to devalue the pound.
"What
is proposed in the economic and monetary union side of the treaty is the
renunciation of the remaining strategic controls over the national economy without establishing any alternative controls
at the European level," he says. "The danger to the next Labour
government is acute. The disastrous decision to join the exchange rate
mechanism of the European monetary system makes us a prisoner of the
Deutschmark. We're in the middle of a great recession and we know that one of
the most urgent steps needed is a radical cut in the interest rate. But we
can't do it because it will break us out of the ERM bands.
"I
see no possible way that the British economy can converge with the strong
German economy without changes in the present burdensome interest rate and
without an adaptation of the exchange rate."
So why
not go for a one-off devaluation, followed by renegotiation of sterling's ERM
band before accepting EMU, the policy advocated by Ken Livingstone and other
pro-European devaluationists?
"That
would be quite unrealistic," says Shore. "It would be possible to
stay within the ERM if it were possible to move the currency in a way that
restored competitiveness. There's nothing wrong with a system of 'fixed but
changeable' exchange rates. But you must be able to change when a fixed rate
becomes no longer sustainable. The real danger is that we shall not be able to
move the exchange rate at all because we're already in the first stage of
economic and monetary union. The aim of virtually everyone in it is to go
straight towards absolutely rigid exchange rates followed by a single currency
and a central bank."
The
official Labour position, of course, is that devaluation is not on the agenda.
The Shadow Chancellor, John Smith, and his team have concentrated on the need
to make the European central bank politically accountable, suggesting that the Council of Economic and Finance Ministers, Ecofin,
should be given an enhanced role in overseeing its workings.
Shore
is scathing about this position: "There's no way that a European central
bank could be made accountable to European finance Ministers
collectively," he says. The Dutch draft of the Maastricht treaty, the
basis for the current negotiations, "contains provisions specifically
designed to maintain the inviolability of the bank from political
interests".
"This
is what it says about independence in Article 107: 'Neither the European
central bank nor the national central banks shall seek or take instructions
from Community institutions or bodies from any Government of a member state or
other body.' The rest of the clause is very significant: 'The Community
institutions' – that includes Ecofin – 'and bodies and the governments of the member states undertake not
to seek to influence the members of the decision-making bodies of the European
central bank and the national central banks.'
"Tough
stuff, and to make doubly sure, the president of the European central bank is
appointed for one term only of eight years. If that doesn't secure his independence,
nothing else will."
Worse,
he says, the draft treaty virtually guarantees the imposition of tight fiscal
policies, dashing the hopes of those who would like Europe to adopt
expansionary policies.
"Article
105 reads: ‘The primary objective of
the European system of the central
bank will be to maintain price stability.'
Nothing is spelt out in the treaty about furthering other economic priorities apart
from one single clause saying 'We shall go for growth, employment and all
these other good things.' It's a purely declamatory article. All the detailed
clauses are about the independence of the bank and the relationship between the
bank and the Council of Ministers or Ecofin.
"So
you have to be a great optimist, frankly, to believe that this treaty allows
for any development of the kind that's wanted. The plain truth is that only
some Governments in Europe are actually in the expansionist high-employment
tradition. Many of them are not. Germany is quite content with a tough
deflationary bias."
"There
is nothing in the draft treaty which foreshadows interventionism at the
European level. At least two or three of the governments sitting round the
table claim to be socialist but they have put forward no such proposal – or if they have done their voices have been so feeble that they
have not been reflected in a single draft clause of the treaty."
Shore
is also critical of the draft treaty proposals on excessive budget deficits.
"Article 104b reads: 'Member states shall avoid excessive government
deficits' – a plain, unequivocal instruction to all
governments. And then an excess deficit is defined. The public sector
borrowing requirement must not be more than 3 per cent of gross domestic
product. And government debt must not be more than 60 per cent of gross
domestic product. We're caught badly on the 3 per cent rule. No Labour government
can afford to have its hands tied on public expenditure and the borrowing
requirement."
"We
abandoned controls over trade when we went into the European Community. More
recently, we have abandoned control over capital. The Single European Act
allows for the totally untrammeled movement of capital, forbids any
preferential use of public purchasing power to assist our own nascent or
troubled industries as we have done in the past, and provides for any takeover
bids and mergers to be decided only by the European Commission.
"All
those powers of intervention have gone and we're left with just two
macro-economic powers: one is to determine interest rates and exchange rates,
and that goes completely if you have a single currency; the second is, of
course the PSBR. That is what is being handed over. You tell me what a Labour
government can do."
"Supposing
all the arguments of the front bench are right and all we need to do is
converge. How on earth do you converge? The economy is already in a state of
mass unemployment, the balance of payments problem is worse than it's ever
been. How do you deal with that, frankly, without changing the value of the
pound? Supply side measures are excellent, but they take five years before they
begin to yield a dividend. And if, in the end, we've trained and educated
people to find jobs somewhere on the Rhine, that isn't what the British people
want. Is Labour going to live with more than 2 million unemployed for five
years? That would show an extraordinary poverty of ambition and relaxation of
the political will."
As for
the notion that a European federal interventionism might develop in the longer
term, "It's wishful thinking. If you say to me 'Right, take a really long
view, after 20 years of miseries inflicted on the whole of Europe, after the
breakdown of the system that's now being envisaged, is it possible that something might emerge, a
federal Europe government, with federal powers of intervention across the whole
continent?' Well, nothing is impossible, but it's a long way off."
In any
case, he says, he does not find a federal Europe particularly attractive or
believe it workable. "I'm not basically wedded to the idea that good
government comes on a continental scale. The United States is the only example
we have of a modern continental economy but, my god, very special circumstances
enabled it to be created. People were poured into a pre-set institutional
mould. There was a common language and a lot of other things which have made
for reasonably strong federal government. Try to translate that into European
terms."
The
British, he says, "have much more confidence in trying to decide their own
fate through their own elected institutions rather than putting their faith in
a European Parliament in which we'd be one-seventh of the total and which
would involve, if it were to be workable, huge transfer payments from the
wealthy countries to those that are most disadvantaged."
So
what should Labour be saying about Europe? "There's no question of
withdrawal from the European Community," says Shore, nor should the EC
simply be left as it is: he agrees with the front bench that the Community
should be extended to eastern and northern Europe. But that is about as far as
he is prepared to go in praising Labour's official line. He does not even
accept that, bad as EMU and EPU might be, the alternative of staying out would
be even worse.
"We've
handled it very badly tactically as well as strategically," he says.
"For reasons that I really don't understand, we've been saying that we
ought to immerse ourselves ever more deeply in a federal Europe.
"The
clear message to the British people is that the Labour Party no longer believes
that it can seriously solve the problems of the United Kingdom without embarking
on the wrong and perilous path to a federal union in which all the strategic
decisions affecting the welfare of the British people are taken by others and
not by people who are directly elected. That is a terrible thing to have to
deal with in terms of winning the battle for public opinion.
"I'm not saying that I hope there is hostility towards Europe
in British public opinion. That kind of sentiment is no good at all. But there
is still a very strong belief in this country that despite all our
imperfections we can run our own democracy pretty well. Long may we continue to
believe it."