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Lord McCarthy: My Lords, is it not the case that the critical recommendation in all of these reports--Cadbury, Greenbury and Hampel--is the setting up of a remuneration committee? It is clear from paragraph 4(4) of the Hampel report that it is recommended that remuneration committees should include non-executive directors rather than executive directors. What we do not know--what the latest Hampel report will not tell us and what it says that it cannot tell us--is to what extent there are remuneration committees; to what extent they consist of non-executive rather than executive directors; and how far they have moved away from crude comparisons. Surely it is time that the Government undertook an independent survey to ascertain to what extent those excellent recommendations are being implemented.

Lord Haskel: My Lords, the Government are undertaking some surveys. Indeed, a survey has revealed that only three companies have set up independent remuneration committees and that shareholders vote on their reports at the annual general meeting. I agree with my noble friend that it is important that research is carried out into this. Indeed, some organisations which monitor investments on the London Stock Exchange are beginning to carry out such research.

Baroness O'Cathain: My Lords, some answers back the Minister said that unless companies publish in their

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annual reports the reports of their remuneration committees the Government will want to take action. May I assure the Minister that the institutions are pushing the people involved in remuneration committees to publish those reports? Is it not better that that the investing institutions have that role rather than the Government?

Lord Haskel: My Lords, if the institutions will carry out that work, it will not be necessary for the Government to use legislation.

Lord Wedderburn of Charlton: My Lords, does my noble friend agree that, in the light of work done by the Law Commission and other bodies on the state of our company law, and as corporate governance relates not only to matters of pay but also to the whole structure of directors, shareholders and others, when the Government are considering legislation on this matter they should take a cool and calm look at the state of our company law?

Lord Haskel: My Lords, I certainly agree with my noble friend, and the paper published in March by my right honourable friend the President of the Board of Trade incorporates that.

Lord Ezra: My Lords, can the Minister indicate the attitude of the Government to the views of the Hampel committee on the role of chairmen and non-executive directors of companies, which appear to be much more relaxed and to go back on what was originally proposed in the Cadbury report?

Lord Haskel: My Lords, the Government are broadly in favour of the recommendations of the Hampel committee as regards chairmen and non-executive directors and their independence.

Lord Mackay of Ardbrecknish: My Lords, before the Government introduce what would be a wages policy for top salaried people, will the noble Lord invite his noble friends to look at the history of wages policies undertaken by previous governments to see what a marked failure they have been before they proceed with a narrow wages policy designed to catch top earners?

Lord Haskel: My Lords, this is not a wages policy but a corporate governance policy.

Lord Dormand of Easington: My Lords, my noble friend said at one point that the Government would wait and see how companies reacted to the two reports named in my Question. Can my noble friend give an indication how long the Government will wait? Are they considering a period of six months, 12 months or something of that order?

Lord Haskel: My Lords, the Government will wait for as long as is required for consultation to take place on this matter. In addition, other events are taking place. The paper on fairness at work is to be published next month and there is to be a government paper on

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company law and competitiveness. All of these matters are subject to consultation at the moment. When those consultations have taken place the Government will be able to take a view.

EMU: Italy and the Convergence Criteria

2.51 p.m.

Lord Chesham asked Her Majesty's Government:

    As President of the European Union, what factors led them to agree that Italy met the convergence criteria for the single currency.

Lord McIntosh of Haringey: My Lords, Italy passes the economic criteria for inflation, interest rates and exchange rates as well as the requirements for legal convergence. The key issue for Italy is the sustainability of the fiscal position. The deficit was 2.7 per cent. in 1997 and is forecast to fall further. In the latest draft outline budget debt is forecast to fall by at least 3 per cent. a year. Italy ran a substantial primary surplus of 6.8 per cent. of GDP in 1997. The draft outline budget has broad political support with approval from the budget committees of both Houses of the Italian Parliament last Thursday. The stability and growth pact locks in fiscal discipline for the future in EMU. The new declaration by ECOFIN on Friday re-emphasised the importance of fiscal discipline in EMU and brought forward implementation of certain aspects of the stability and growth pact to ensure its effectiveness in the important early years of EMU. Taking these factors into account, the Government endorsed the recommendation that Italy should join the single currency on 1st January 1999.

Lord Chesham: My Lords, I thank the Minister for his reply. I understand that there was a requirement under the Maastricht criteria that debt should be no greater than 60 per cent. of the GDP of the country. Currently, Italy's debt is running at 122 per cent. of GDP. That figure has been brought down by a one-off tax this year to reduce borrowing. When will Italy meet the Maastricht criteria? When will that figure be sustainable at less than 60 per cent. of GDP? I should like to have a date.

Lord McIntosh of Haringey: My Lords, the important matter, as recognised by ECOFIN, the European Parliament and the meeting last weekend, is not compliance with the convergence criteria but the trend. All of the trends in Italy are in the right direction. It is not appropriate for me to give a date.

Lord Taverne: My Lords, was it not always sensible to view the convergence criteria in perspective and essentially as guidelines to the important question of whether or not member states could sustain a lower rate of inflation? As the debt criterion is the least important, rather than adopt an attitude of carping superiority towards Italy, as so many Opposition statements have done, would it not be more appropriate to congratulate

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the Government of Italy on their extremely successful and strenuous effort to impose financial discipline, which has resulted in their economy coming in well below the really important 3 per cent. deficit criterion?

Lord McIntosh of Haringey: My Lords, the noble Lord is absolutely right. It is worth recording that the Italian Finance Minister was congratulated by his fellow Finance Ministers at the meeting in Brussels last weekend on exactly those achievements.

Lord Grenfell: My Lords, does my noble friend agree that if Italy had been excluded on the ground that its debt to GDP ratio was too high and was falling too slowly, the almost inevitable result would have been an immediate rise in interest rates in Italy? If that is so, would it not have meant that a perfectly laudable debt reduction scheme would have been virtually ruined by the enormously increased cost of servicing the debt? Does my noble friend agree that that would be a case of Europe shooting one of its own in the foot?

Lord McIntosh of Haringey: My Lords, my noble friend rightly draws attention to the interaction and interdependence of the convergence criteria. He is right to say that if we pick on one at the expense of all the others we will be in danger of doing greater damage to the economy of Italy.

Lord Campbell of Alloway: My Lords, when the noble Lord refers to "financial discipline", does he mean simply the convergence criteria or something else? What happens when that financial discipline breaks down and shatters?

Lord McIntosh of Haringey: My Lords, I thought I made it clear in my initial answer that the Government were looking wider than the requirements for legal convergence. In particular, in the case of Italy we were looking for sustainability of the fiscal position. I have no intention whatever of answering hypothetical questions about what might happen if this broke down.

Lord Stoddart of Swindon: My Lords, can my noble friend confirm that the Italian Government were able to push through their special tax only by promising that they would repay the tax in due time? Can my noble friend tell the House the timescale of that? Secondly, as my noble friend has said that in his view the noble Lord, Lord Taverne, is absolutely right about the Treaty of Maastricht, does he agree that if the provisions of that treaty can be ignored as far as this matter is concerned therefore all other matters under the treaty can also be ignored?

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