HC Deb 27 July 1978 vol 954 cc1786-90
13. Mr. Dykes

asked the Chancellor of the Exchequer what initiatives he now proposes to take in the EEC Finance Council to develop United Kingdom participation in the outline Franco-German monetary fusion scheme announced at the recent European Council meeting in Bremen.

18. Mr. Silvester

asked the Chancellor of the Exchequer whether he will publish a White Paper setting out his response to the proposal for a European monetary system.

19. Mr. Wrigglesworth

asked the Chancellor of the Exchequer what progress has been made in the discussions about a European zone of currency stability.

Mr. Healey

The Government are taking a constructive part in the work to formulate a practical European monetary system. The House will be kept informed of the progress of this work.

The EEC Finance Council at a meeting on 24th July, called upon the Monetary Committee and the Committee of Governors of the Central Banks to examine in co-operation with the Commission, in the light of the discussions at the present meeting and at that on 19th June 1978, and taking into account the main points raised at those meetings, the system outlined in the annex to the summary of conclusions of the Presidency of the European Council on 6th and 7th July 1978 relating to the creation of a closer monetary co-operation. It asked these committees to report back to it for its meeting on 18th September 1978.

The Council also called upon the Economic Policy Committee to study the action which needed to be taken, within the framework of a European monetary system, to strengthen the economies of the less prosperous member States and to report back to it, through the Permanent Representatives Committee, in time for its meeting on 18th September and its subsequent meetings on economic and monetary questions.

The Council instructed the Permanent Representatives Committee to define the brief thus entrusted to the Economic Policy Committee at its meeting today—

Mr. Ridley

On a point of order, Mr. Speaker. May we have shorter answers, in the interests of making progress?

Mr. Speaker

The Chancellor and Ministers have heard the hon. Gentleman's point of order. That is the end of the answer, is it not?

Mr. Healey

On a point of order, Mr. Speaker. I was answering three Questions and also replying to a point often made by hon. Members on both sides of the House that I should, where possible, give an oral report on the conclusions of the meetings of Community bodies.

Mr. Dykes

I thank the Chancellor of the Exchequer for that detailed reply. Could he tell us which subsequent question he is trying to avoid or postpone? If this fund is set up in due course, will he press in the foreseeable future—which must be in the near term—that the idea of the fund being located in London should be put on the agenda for any subsequent meetings?

Mr. Healey

I shall not particularly press for that.

Mr. Wrigglesworth

Is my right hon. Friend aware that, while many of us share the anxieties that he and the Prime Minister have expressed about the Bremen scheme, it is important not to lose sight of the benefits to employment and growth and stability in the western world which could flow from the greater currency stability that a scheme of this sort could provide?

Mr. Healey

The benefits which flow from a scheme of greater stability depend entirely on the nature and terms of the scheme. The British Government strongly take the view, which is held by many of our Community colleagues and the United States Government, that a form of scheme which had a deflationary effect on the Community would be very damaging to world growth. A form of scheme which relaxed the constraints on growth imposed by the anarchy in the currency markets at the present time would have a benign effect on the economies of the western world, and the discussions which I have described are designed to achieve the good outcome to which I have referred.

Mr. Biffen

Arising out of Question no. 13, may I ask whether the Chancellor does not agree that one of the initiatives that would be available to the Government in the context of any future monetary arrangements would be to insist upon a fundamental reorganisation of the common agricultural policy? Is that one of the initiatives that he seeks to pursue?

Mr. Healey

May I say first how much I welcome a question from the hon. Member for Oswestry (Mr. Biffen), whose very wise remarks I have quoted on several occasions during the last 45 minutes or so.

The British Government believe very strongly that it is necessary to transform the CAP into a system which produces a much more rational distribution of benefits and costs. My right hon. Friends the Foreign Secretary and the Chief Secretary to the Treasury and I have made this point. I did so at the meeting of the Council which took place on 24th July. I am grateful to the hon. Member for Oswestry for the attention with which he follows our affairs and the helpful nature of his interventions.

Mr. John Evans

Does my right hon. Friend agree that before the United Kingdom can join such a scheme there will have to be much greater convergence of the economies of the Community countries, and that if the United Kingdom were to join such a scheme as this in January it would have a completely disastrous effect on our economy?

Mr. Healey

I have just made clear that the effect of the scheme will depend entirely on its structure, terms and conditions. We are seeking to produce a structure, terms and conditions which will reduce the constraints on growth rather than increase them. I know that in that endeavour I shall be able to count on the support of my hon. Friend.

Sir G. Howe

Does not the Chancellor accept that one of the necessary implications of movement along the lines foreshadowed in the Bremen proposals would be relaxation of exchange controls in line with our treaty obligations? Are the Government prepared to move in that direction?

Mr. Healey

As I have made clear, the Finance Council of the Community agreed last week that it would consider the Bremen proposals in the light of the discussions at meetings of the Finance Council both last week and on 19th June, when the Council adopted guidelines for a European monetary system in line with the proposals that I had made. The idea of relaxing exchange controls appeared neither in the Bremen proposals nor in the guidelines I have mentioned.

Mr. Christopher Price

Is my right hon. Friend aware that to say at one and the same time that one is in favour of greater monetary fusion and the dismantlement of the CAP is simply nonsense, as the one involves the other? How do the Government intend to get over that?

Mr. Healey

With great respect, I must say to my hon. Friend that he is quite mistaken in what he has just said. It is perfectly possible to change the CAP so that it works in a more rational way, reduces the cost of food instead of increasing it, and produces a sensible rather than nonsensical distribution of costs and benefits, and to achieve greater monetary stability in Europe. It is the intention not only of this Government but of many Governments in the Community to achieve both these objectives at the same time.