Speeches, Interviews & Other Statements

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1992 Oct 8 Th
Margaret Thatcher

Article for The European (Maastricht)

Document type: Speeches, interviews, etc.
Document kind: Article
Venue: -
Source: Thatcher Archive
Journalist: -
Editorial comments: Item listed by date of publication.
Importance ranking: Major
Word count: 1294
Themes: British Constitution (general discussions), Conservative Party (history), Monetary policy, Trade, Economic, monetary & political union, Foreign policy (Central & Eastern Europe), Foreign policy (USA)

Like many of my fellow Tories, I too have a favourite quotation from Disraeli. At Manchester in 1872 he said that “the programme of the Conservative Party is to maintain the Constitution of the country” . This Conservative government, like its predecessors, should have as its main priority the maintenance of our constitutional freedoms, our democratic institutions, and the accountability of Parliament to the people. Because I believe in these principles so deeply I cannot support the ratification of the Maastricht treaty, and I welcome sterling's departure from the Exchange Rate Mechanism (ERM).

The ERM and Maastricht are inextricably linked. The first is a prerequisite to the fulfilment of the second. We found the confines of the first unbearable; the strait-jacket of the second would be ruinous. Thanks to the decision to float the pound, we now have a chance to follow an economic policy that puts British needs first. Like the Maastricht treaty, the ERM in no way represents what is best for British interests.

When Britain joined the ERM we believed not that it was a fixed rate system but an adjustable one. However, when it was treated as a stage towards a single currency it became far more rigid. Devaluations and revaluations were increasingly frowned upon. And so the trouble began. For no fixed exchange rate system—be it the gold standard or Bretton Woods—has been sustainable. Unless there is some adjustment to the realities of the market and capital movements, the devil will always take the hindmost. The strongest currency will always make the running.

I do not blame the Germans. They have managed the new currency in exactly the way we should have managed ours. They put their country first and in doing so showed up the impossibility of a single currency for a group of such divergent economies as those of Europe. Once we realised that the ERM lacked the flexibility we expected and required, we should have left. Because we did not, we were forced to keep up interest rates even though our recession at home was signalling the need to reduce them. Home owners and businessmen have paid a heavy price. However, at least now we have the freedom to put those problems right.

We now need an economic strategy which works with markets, not against them, is realistic and sustainable, and provides a framework for growth. We must return to the policy of domestic monetary control that worked throughout most of the 1980s, cutting inflation from over 20 per cent to under four per cent while the economy expanded.

Such an economic strategy for sustained growth and sound money will require the firmest possible leadership. It will mean rigorous control of public spending and borrowing, enabling the lower interest rates and lower taxes that boost investment, output and jobs. Above all, it requires confidence—the confidence that we had in the 1980s that we can manage our own monetary policy and economic affairs without depending on anyone else.

And that leads directly on to Maastricht. That treaty's goal of European economic and monetary union looks even more impossible after recent events. At least under the ERM there was an escape hatch—as Britain and Italy found three weeks ago; but there would be none under a single currency, which remains the objective of the treaty. Although the final decision for Britain to cease issuing sterling would rest with the House of Commons, we would be on the conveyor belt to a single currency, committed to each stage preceding it. And then the same arguments used now to urge our ratification of Maastricht would doubtless be brought to bear on finally moving to a single currency.

What has happened makes it all the more difficult to see why this treaty, which establishes a European Union (political, social and economic) is being pursued. In their efforts to secure public acquiescence on Maastricht—they cannot hope for more than that—some have talked of the treaty being de-centralising, and of doing nothing to compromise the idea of Europe as a group of nation states, maintaining their own individuality. The reality is nothing of the sort. The treaty will hand over more powers to unelected bureaucrats, and erode the freedoms of ordinary men and women in this country. And no mere declaration on subsidiarity is going to change the Articles or the thrust of the treaty itself—even assuming that more notice is taken of such a declaration than of those I insisted be appended to the Single European Act.

It is nonsense to describe Maastricht as if it were a technical adjustment to the Treaty of Rome. It expands from 11 to 20 the number of policy areas in which the unelected Commission in Brussels can have the sole right of initiative. The Commission will also be “fully associated with the work carried out in the common foreign and security policy field” and in the fields of justice and home affairs.

Our political debate on the Maastricht treaty and the future development of Europe has been conducted in, if possible, even less rational terms than our discussion of exchange rates. We are warned, from home and abroad, that it would be a national humiliation if Britain were left in the “slow lane” while others sped towards economic and monetary union. We risk being relegated, it is delicately hinted, to the “second tier” of a two-tier Europe. We must not miss the Continental Express. We must be at the “heart” of Europe. But, as Lord Salisbury once pointed out, half the errors in politics come from taking metaphors literally.

There have been two visions of Europe competing with each other in recent years. There is, first, the federalist vision of a Europe run increasingly from Brussels, united by a common citizenship, harmonised by bureaucratic regulations, equipped with common economic, budgetary, foreign and defence policies, using a single currency and acquiring all the flags, anthems and symbols of nationhood: all in all, a United States of Europe in embryo.

Then there is what might be called the “con-federal” concept of a Europe of nation states, based upon the idea of co-operation between independent sovereign countries loosely linked in a free trade area, with competition between differing tax and regulatory systems and with freely floating currencies. This “confederal” Europe would accommodate the countries of eastern Europe and give them a reasonable stability. It would maintain, not jeopardise, our relationship with Europe's great friend and protector, the United States.

A “two-tier” Europe would at least enable the different groups of Europe to pursue these different visions. Nor is it unthinkable that the Maastricht economies in the “fast lane” to currency union, social harmonisation and higher taxation might find themselves, for those very reasons, in the “slow lane” to economic growth. Britain would then find itself not “left behind” by more progressive economies, but “left out” —and out in front of a bloc of more stagnant ones. Indeed, if Conservative ministers don't believe this to be so, what is the rationale behind the government's domestic policy of deregulation and lower taxation?

It is time to get our priorities right. There are more urgent things for Europe to attend to now than Maastricht. It must further free trade by completing the Uruguay round of Gatt. It must strengthen links with America, inside and outside Nato. Above all, it must use both free trade and security to help ex-communist nations build prosperity and entrench freedom.

There are also more urgent things for the government to concentrate on than re-introducing the Maastricht treaty. The Conservative Party needs to be united, not torn apart. Britain needs to regain the confidence that we can manage our own affairs successfully once more. And we need a clearly defined economic policy to encourage soundly-based growth. Maastricht can do nothing to assist but much to damage progress towards those objectives. The government must recognise that Maastricht, like the ERM, is part of the vision of yesterday. It is time to set out the vision for tomorrow.