Similarly, the ‘opt-out’ on monetary union is less than meets the eye. It has only given us the right to opt out of the third stage of monetary union, not the first or second stages. The precise degree to which the first two stages of the process limit Britain’s economic freedom in practice is debatable, though on any view it is considerable. Member states are required to ‘regard their economic policies as a matter of common concern’; guidelines on economic policy are to be established by the Commission and the Council of Ministers, and member states are then to be monitored for compliance with those guidelines through a system called ‘multilateral surveillance’. The Commission has acquired a power to monitor the public sector deficits of member states and to initiate procedures against the member state if it considers such a deficit to be ‘excessive’. During the second stage of monetary union, member states must prepare their central banks for independence (as Britain has already begun to do) and adopt and adhere to a ‘multi-annual convergence programme’ designed to align currencies for eventual monetary union.
Finally, each member state is required to ‘treat its exchange rate policy as a matter of common interest’. There is a danger that this will be interpreted by other member states and by the European institutions as imposing an obligation on Britain to rejoin the ERM and again to subordinate its monetary policy to the maintenance of an external parity. Although the effective shattering of the ERM in 1992/93 makes the future course of convergence towards EMU less predictable than at the time of the signing of Maastricht, the widened 15 per cent ERM bands are likely to be interpreted as being ‘normal fluctuation margins’ for the purposes of the Treaty’s so-called ‘convergence criteria’. This would permit an inner core of member states to proceed to the full currency union of Stage 3 with only limited slippage to the original timetable. And the basic problem with the British right to opt out of Stage 3 remains. Once an inner core had entered Stage 3 and formed an ECU currency bloc, Britain would come under strong political (and ultimately legal) pressure to maintain the pound’s parity against the ECU in accordance with its continuing Stage 2 obligations, and so to follow ECU interest rates. And if some member states enter into full monetary union, Britain would have no seat on the European Central Bank Board which sets the interest rates we would be expected to follow. In these circumstances the temptation for Britain to go the whole hog and move to the third stage of monetary union would be very great. The Maastricht Treaty makes it clear that Stage 3 is ‘irreversible’, which means that we would, at least under Community law, have no right subsequently to withdraw and issue sterling again. That would be a fundamental and crucial loss of sovereignty and would mark a decisive step towards Britain’s submergence in a European superstate.
The argument that this will never happen because the break-up of the ERM demonstrated the folly of fixed exchange rates in a turbulent world overlooks two important considerations. First, the history of the acceleration of moves towards federalism in Europe demonstrates that the federalists are not to be dissuaded by circumstances from pursuing their project: indeed, each blow to it only confirms them in their desire to move further and faster towards an irrevocable conclusion. Secondly, it would be possible to avoid much of the instability caused by speculative flows across the exchanges which caused the break-up of the ERM by moving directly to locked currencies and EMU. Of course, the consequences for the weaker national economies would be even more disastrous than they were as a result of overvalued currencies in the ERM. Large regional variations in economic activity, industrial decline and soaring unemployment on the periphery would follow in due course and these in turn would prompt heavy migration across frontiers.
But we would be brave to the point of foolhardiness to imagine that such consequences would necessarily lead to the abandonment of the venture. For such a favourable outcome would depend upon the health and responsibility of democratic institutions in Europe. But national political institutions are losing their powers to centralized European ones on which there is no real democratic check. In any case, it is an abdication of political leadership to expect hostile circumstances over which one has no control to relieve one of the responsibility of pursuing policies in the nation’s long-term interest.
My dismay about Maastricht reflected my concern about its effects internationally almost as much as the risks it posed to Britain. Although in the Bruges speech in 1988 I spoke about the distinctive strengths of British traditions and institutions, I was equally concerned about the effects on other European countries and on the outside world. Ultimately, of course, it is up to the Germans, French, Italians and others what kind of economic and political relations they want with each other. But anyone who does not sound the alarm on seeing great nations in headlong pursuit of disastrous goals is grossly irresponsible — and indeed a bad European.
It makes no sense for Germany to abandon the Deutschmark; nor for France to settle down permanently to playing second fiddle to its dominant eastern neighbour; nor for Italy to be distracted from the task of domestic political reform by looking to the European Union for solutions; nor for Spain, Portugal, Greece and Ireland to rely on subsidies from Germany in exchange for abandoning the opportunity to make the best of their lower labour costs; nor for the Scandinavian countries to export their high social costs to other European countries rather than cutting them back. As for the former communist countries of Central and Eastern Europe, how can they be expected to live with the high-cost regimes which the monetary and social policies of the Community would place upon them? It is difficult to see them being anything other than distant, poor relations of a Delors-style European Union. For the members of the Union, therefore, such a policy offers economic decline. For its neighbours it offers instability. For the rest of the world it provides a momentum towards protectionism.
For a treaty which threatens so much harm to all concerned, Maastricht has not even had the promised effect of uniting the Conservative Party. Indeed, it split the Conservative Party in Parliament and in the country, undermining confidence in the Government’s sense of direction. Because the strategy of which it was a part rested essentially upon proving to our partners that Britain wished to be ‘at the heart of Europe’, it led directly to the unnecessarily deep recession caused by trying to maintain an unsustainable parity for sterling within the ERM. The humiliating circumstances of our departure added to the political damage to the Conservative Party. And all of the fundamental problems will surface again as we approach the 1996 Inter-Governmental Conference.
I could foresee enough of this in November 1991, even before the full details of Maastricht were known, to understand that I would have to oppose it root and branch. For the reasons I have already outlined, this was bound to be more embarrassing for all concerned if I remained in the House of Commons. Moreover, it seemed likely that the result of the general election, whenever it came, was likely to be a reduction in the large majority we had obtained in 1987. This would make it more difficult for me to speak and vote as I wanted. In any case, although I had taken the same seat on the backbenches that I had occupied some twenty-five years earlier — and I had enjoyed my time as a young backbencher — I now felt ill at ease. The enjoyment of the backbenches comes from being able to speak out freely. This, however, I knew would never again be possible. My every word would be judged in terms of support for or opposition to John Major. I would inhibit him just by my presence, and that in turn would inhibit me. So I decided to stand down as Member of Parliament for Finchley and accept a life peerage.