§ Baroness Wilcoxasked Her Majesty's Government:
What has been the impact of the introduction of the euro on price convergence in the euro-zone.
§ Lord McIntosh of HaringeyMy Lords, the Government said that they will complete an assessment of the five economic tests within two years of the start of this Parliament. The preliminary analysis supporting the five tests assessment—that is, technical work needed to enable the assessment to be completed within two years—is well under way. The 6th September paper for the Treasury Select Committee on the Treasury's approach to the preliminary and technical work made clear that that work, which will be published alongside the assessment of the five tests, will include a supporting study on price differentials. Further details can be found in the 6th September paper, a copy of which is in the Library of the House.
§ Baroness WilcoxMy Lords, I thank the Minister for answering my Question. Can he give the House some concrete examples of where prices have already come together?
§ Lord McIntosh of HaringeyMy Lords, a very detailed report was produced and published in July this year. It describes the whole process of adoption of the euro. It is called EPR6–6th Report on Euro Preparation. I recommend it to the noble Baroness, Lady Wilcox. As to the effect on prices, I believe that the best evidence comes not from the Government but from Eurostat, which, in its most recent report on 18th November, estimated that the effect of the changeover on inflation was between 0.0 and 0.2 per cent.
§ Lord TaverneMy Lords, the evidence relating to the impact of the euro seems to be somewhat ambivalent. Small prices—that is, for items such as cups of coffee—have risen since the introduction of the euro but big prices—for major goods such as cars and so on—are likely to go down. Is it not important that we are part of a system in which price transparency has led to a great deal more competition, and are the Government not keen to promote competition?
§ Lord McIntosh of HaringeyYes, my Lords. The argument for the euro has always been one of transparency of prices leading to keener competition. The euro having been in place for only 11 months, I 1134 believe it is a little early to be as definite as the noble Lord, Lord Taverne, appears to be about the detail. However, certainly the aggregate effect has not been one of inflation, as reported in a number of Euro-sceptic British newspapers. I am as confident as the noble Lord that, in due course, there will be better evidence of the beneficial effects of transparency.
§ Lord SaatchiMy Lords, was not one of the benefits of the euro said to be that the greater transparency offered would lead to more common standard prices across Europe? The reason I ask is that if, around the euro-zone, one took a taxi to the airport where one bought a book and had a cup of coffee, the taxi fare per kilometre would cost 3 euros in Brussels and 1 euro in Stockholm; a top-10 paperback would cost 7 euros in Madrid and 23 euros in Paris; and the Nescafe would set one back 8 euros in Frankfurt and 4 euros in Rome.
§ Lord McIntosh of HaringeyMy Lords, as always, I congratulate the noble Lord, Lord Saatchi, on the detail and quality of his research, and I should be grateful if that could be passed on to his researcher. Of course, price standardisation does not occur immediately and will not occur to the extent that prices affected by, for example, different levels of VAT will come together. In general, the point made by the noble Lord, Lord Taverne, is right. Transparency will in due course—not immediately and certainly not within 11 months—lead to a better deal for the consumer.
§ Lord BarnettMy Lords, I thank my noble friend for his original, very detailed Answer to the Question. I thought that it covered the points very well. Perhaps I may also be allowed to congratulate the researcher of the noble Lord, Lord Saatchi. I do not know what on earth he was doing with that research, but perhaps my noble friend can help us. Whether it showed inflation in the euro-zone to be higher or lower, the Eurosceptics would still attack it. That applies to the view of the research expressed by the noble Lord, Lord Saatchi. Does my noble friend accept—from what he says, I believe that he does—that, since its inception, the euro-zone has gone very well indeed?
§ Lord McIntosh of HaringeyMy Lords, that is what the 6th Report on Euro Preparation, which we published on 17th July, says. It states that, despite all the predictions of doom and gloom before and immediately after the introduction of the euro, the changeover went extremely well. A period of two months was allowed for the changeover. However, from my experience, and as reported in EPR6, the changeover took place within two or three days. It is possible to make such changes without great disruption.
§ Baroness Carnegy of LourMy Lords, the noble Lord's Answer to my noble friend who asked the Question concerned inflation. Is he saying to the House that, thus far, there is no sign of price convergence?
§ Lord McIntosh of HaringeyYes, my Lords. I am saying that the element of inflation which has taken 1135 place and which, according to Eurostat—the European statistical office in Luxembourg—can reasonably and legitimately be attributed to the changeover to the euro is minimal. It is in the range 0.0 to 0.2 per cent. There are two different issues. One is convergence of prices across European countries and the other is the general level of prices. I believe that it is fair to distinguish between the two, although both are clearly important.
§ Lord RichardMy Lords, is my noble friend aware that I read the same table as, I believe, did the noble Lord, Lord Saatchi, in either the Telegraph or the Daily Mail showing comparative costs of taxi rides? Is my noble friend further aware that the most expensive taxi ride in the European Union is in this country, which, if my memory serves me correctly, is outside the euro-zone?
§ Lord McIntosh of HaringeyMy Lords, it is worse after midnight.