Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Monson: Before the noble Lord, Lord Mackay, sits down, perhaps he will clarify one point made towards the beginning of his interesting speech. He said that the EU is no different from any other "government". Was that a Freudian slip or does he consciously believe that in due course the EU ought to be granted all the powers of a national government?

Lord Mackay of Ardbrecknish: It was not even a Freudian slip; it was just a slip. Perhaps it would have been better to say, "from any other bureaucracy." However, I shall be careful when the noble Lord is listening to me.

Lord McIntosh of Haringey: I could see the relief on the face of the Leader of the Opposition when the noble Lord, Lord Mackay of Ardbrecknish, after a very heterodox speech from his party's point of view, rejoined the party line in the last few seconds. I felt that, "With one jump, Jack was free"!

I do not resent the fact that we have had a debate of this length on this subject. I certainly do not intend to use the briefs which make fun of the wording of the two amendments we are in theory debating. I do not even object to the fact that we are debating something which is neither in the Amsterdam Treaty nor in this Bill, as my noble friend Lord Shore recognised. Of course, it could be argued--and he went on to attempt to argue--that the growth and stability pact was something new and that we had to reconsider EMU as a result of the growth and stability pact. I shall have to remind him in a few minutes that the changes only clarify the procedures in Maastricht and do not impose any new legal obligations.

The debate is about EMU because Members of the Committee want it to be about EMU. Fine. Let me set out the Government's position towards economic and monetary union. First, we want the single currency to succeed. We all have a strong vested interest in ensuring that EMU is a success and good for prosperity, jobs and stability. It is also in everyone's interests that EMU is built on a firm and sustainable basis. The treaty is clear. EMU must be based on a high degree of sustainable convergence. We will take our responsibilities of the presidency seriously. We will use our presidency constructively and supportively during the crucial decisions in May on which countries should join EMU. In saying that, I recognise the force of the point made by the noble Lord, Lord Howell of Guildford, supported by my noble friend Lord Grenfell, that the real decisions will be made in May rather than in January next year, if they have not already half been taken.

We and our European partners are committed to launching a successful EMU on schedule on 1st January 1999. But I shall not comment on the economic positions of other member states now, except to agree with the noble Lord, Lord Tugendhat, that much of the effort that has been made to achieve the degree of convergence that has been achieved, has been worthwhile, regardless of whether anybody is accused of fudge.

12 Mar 1998 : Column 369

The Chancellor of the Exchequer said last October that in principle British membership of a successful single currency would be beneficial to Britain and to Europe. If the single currency is successful and the economic case for the UK to join is clear and unambiguous, then we believe that Britain should be part of it. We are pleased to have that confirmed by Members of the Committee from all sides of the House--Europhiles of all political persuasions--in the debate this afternoon.

The Chancellor set out five economic tests which must be met before the Government can recommend membership of EMU to Parliament and the British people. Those are: whether there can be sustainable convergence between Britain and the economies of a single currency; whether there is sufficient flexibility to cope with economic change; the effect on investment; the impact on our financial services industry, and whether it is good for employment. To share a common monetary policy with other member states represents a major pooling of economic sovereignty. The Government accept therefore that there are important constitutional considerations. That is why we are committed to a referendum--my noble friends should not be too pleased too soon--if we decide to join. However, we do not accept that there is a constitutional bar that outweighs the economic tests as the decisive reason why we might join EMU. The constitutional issue is a factor in the decision, not an overriding one. If the single currency would be good for British jobs, business and future prosperity, then it is right in principle to join.

The Government recognise the benefits of a single currency. A successful single currency will act as a complement to the single market. It will reduce transaction costs and exchange rate uncertainty on trade within the euro zone. It will make prices more transparent, boosting competition and providing new opportunities for companies to trade and invest. A successful single currency will deliver price stability, as a foundation for sustainable, non-inflationary growth. It will reduce the damaging effects of volatility on investment, employment and, ultimately, economic prosperity.

However, the Treasury's assessment of the Chancellor's five economic tests was that it is not in this country's interests to join the single currency in 1999. Neither flexibility nor convergence with the other European economies are sufficient at present to make joining EMU during the course of this Parliament in Britain's economic interests.

Barring some fundamental and unforeseen change in economic circumstances, there is no realistic prospect of Britain having demonstrated, during this Parliament, convergence which is sustainable and settled. So making a decision during this Parliament to join is not realistic. It is therefore sensible for business and the country to plan on the basis that, in this Parliament, we do not plan to enter a single currency. But in order to create a real option of joining early in the next Parliament, it is essential that the Government and business prepare intensively during the Parliament. In this way, we could join if the single currency is successful and if the people agree in the referendum we have promised.

12 Mar 1998 : Column 370

The Government are committed to a programme which is in the national economic interest and which will help satisfy the five economic tests: achieving macro-economic stability through sound fiscal and monetary policies; setting in place the right framework for low inflation through our reforms to the Bank of England and our commitment to monitor the inflation target in the light of the practices of the European Central Bank; ensuring that our fiscal rules and deficit reduction plan continue to be consistent with the terms of the stability and growth pact, underlining our commitment to avoid an excessive deficit; promoting greater flexibility in the UK economy and in Europe through our Getting Europe to Work initiative and making product markets work better by introducing new competition legislation; and negotiating to secure the best interests of our financial sectors and to open up the single market in financial services.

It is clear that the euro will affect the entire European business environment from 1st January 1999. It will have implications for businesses trading or investing in those countries which adopt the euro. I was able to give figures at Question Time this afternoon which indicate that for goods and services the share of our exports to the 11 countries which are on course to join the euro is almost 50 per cent. of the total; as the noble Lord, Lord Tugendhat, said, 15 per cent. of our gross domestic product.

The Government have established three complementary organisations to help preparations for EMU. Together they will examine and advise on the preparations needed, whether we are in or out of the single currency. I make this point to the noble Lord, Lord Taverne, who in his first speech talked about the necessity for preparations, whether or not we join.

First, the Chancellor set up a standing committee in September 1997 to oversee and co-ordinate preparations across the economy, in the private and public sectors, and to identify areas of preparations not being addressed elsewhere. The committee will produce an outline changeover plan by the end of the year, setting out the steps involved in joining EMU.

Secondly, the Business Advisory Group was established in autumn 1997 to look at the crucial practical questions, such as what UK firms need to do to trade in and use the euro in 1999. A report was published in January summarising the group's findings and conclusions.

Thirdly, the Euro Preparations Unit was set up in the Treasury with help from the DTI to provide support and help to business and public authority programmes. I was asked whether we recognise the needs of the public sector as well. The unit aims to ensure that British business and public authorities are ready for the introduction of the euro in other countries next year. It will also complete the necessary planning and preparation required to enable UK entry early in the next Parliament, if appropriate. A network of euro co-ordinators has also been established, one in each government department. Individual departments are now considering the implications of EMU for their operations. The DETR is helping local authorities to prepare.

12 Mar 1998 : Column 371

7.45 p.m.

Lord Stoddart of Swindon: I thank my noble friend for giving way on this important point. The preparations which businesses have to make will be very expensive, particularly if we go into a single currency. While large corporations may be able to cover those expenses, smaller businesses may very well not be able to do so. Are the Government contemplating, and, if not, will they contemplate, some means whereby they can be assisted by public funds to do something which, after all, many of them do not want and which is powered by government here and indeed in the European Union?

Next Section Back to Table of Contents Lords Hansard Home Page