European Monetary System

HC Deb 23 November 1978 vol 958 cc1454-8

4. Mr. Tim Renton

asked the Chancellor of the Exchequer whether joining the European monetary system will be helpful to the stability of sterling.

Mr. Healey

If the system were lasting and effective, membership of it would be helpful to the stability of sterling.

Mr. Renton

That qualifies as a typical non-answer from the Chancellor. Why is he so adamant against Britain accepting a wider band arrangement at the start like Italy, particularly since such a band appears to be closely aligned with the Treasury's current management of the sterling exchange rate? Is it not a fact that the Chancellor, having had one eye blacked by the unions over pay policy, does not dare to get the other one blacked over EMS by the Tribune Group?

Mr. Healey

My eyes are quite clear, though they may be a little pink because of the long discussions I have had on the EMS with my colleagues abroad. On the question of the wider band I do not believe that a wider band would be helpful to sterling, any more than the Irish or French Government believe that it would be helpful to the French franc or the Irish pound. I can understand the reasons why the Italian Government believe that it might be helpful to the lira, and if they wish to make use of this option I would strongly support their right to do so.

Mr. Hoyle

Does my right hon. Friend agree that it would be a disaster to join the EMS, particularly in the light of the findings of a very important House of Commons Committee which forecasts that unemployment will rise by more than 1 million and that there will be a lack of growth by 8.4 per cent. by 1981?

Mr. Healey

I regret to correct my hon. Friend, whose support I always welcome on these occasions, but I read the report of the Select Committee very carefully. It avoided coming to any conclusion. I notice that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) having expressed strong opposition to EMS outside, has decided for political reasons that he is now strongly in favour. Of course the Conservative Front Bench is divided, as always, into three parts like Gaul.

Mr. Powell

Is not any system for the international maintenance of currency parities almost bound to cause inflation somewhere—namely, amongst those countries which would be called upon to lend large quantities of their own currency in order to maintain the parities?

Mr. Healey

Wth great respect, we had a system of fixed, but adjustable, parities for a quarter of a century under Bretton Woods, and during that period the general rate of inflation was very much lower than it has been at any time since that system collapsed.

Mr. Hooley

Does my right hon. Friend agree that, if there is no convergence between the real economies of the countries concerned, the EMS will not work, and if there is such a convergence, the EMS is not necessary?

Mr. Healey

I think that this syllogism, if that is the right word for it, attractive at it is, does not comprehend the whole of the truth. The fact is, for example, that the European currency snake—and I have made it clear that the Government would never join an organisation of that nature after the experience of the Conservative Government, who joined it and came out again within seven weeks—has survived despite substantial differences in performances on inflation and balance of payments between its member countries, and my hon. Friend and the House would be wise not to be too dogmatic on this question.

Sir Geoffrey Howe

Does the right hon. Gentleman agree that it would be unwise for the discussion on this matter to proceed on the basis that the figures quoted by the hon. Member for Nelson and Colne (Mr. Hoyle) represented a reality of forecast or assumption? Does not the Chancellor agree that that suggests that the Government have been unwise not to play a greater part in leading and informing public debate in this country? Will he indicate whether the Government's decision or line of decision on the matter is likely to be revealed to us in the Green Paper which I understand is to be published tomorow? Will he give an assurance that, whatever decision the Government or other Governments come to on the present proposals, he will do everything possible to maintain the opportunity of the United Kingdom to play a full part in promoting greater monetary co-operation in Europe?

Mr. Healey

I can certainly give the latter assurance. The right hon. and learned Gentleman is quite right. The type of model published by the Select Committee in an annexe on the basis of arbitrary assumptions is, as the Financial Times said today, a sort of parlour game which throws very little light, and the Green Paper makes clear what will be likely to happen if we join a particular scheme of a particular nature.

The right hon. and learned Gentleman asked for a review of this matter. I draw to his attention the views of the hon. Member for St. Ives (Mr. Nott), also an Opposition Front Bench spokesman, who made a speech on this matter yesterday, in which the only concrete proposal was that we should replace sterling with the deutschemark. He concluded his speech by advising the Conservative Party to avert arguments about being pro or anti-Europe as well as the debate between fixed or floating exchange rates. Instead, they should 'pronounce our enthusiasm' for greater monetary co-operation in Europe. That type of agnostic ambiguity is not a very useful contribution.

8. Mr. Kilroy-Silk

asked the Chancellor of the Exchequer if he will now publish all the working papers prepared on the subject of the European monetary system.

23. Mr. Bendall

asked the Chancellor of the Exchequer if he will make available all papers relevant to the current discussions on the European monetary system.

Mr. Healey

I have laid before the House a memorandum which includes the basic document outlining the proposed scheme and a Green Paper will be published tomorrow.

Mr. Kilroy-Silk

Will my right hon. Friend make a gesture, even under our limited open government policy, by publishing the following Cabinet documents: GEN 136(12)78, on the likely foreign reactions to Britain's membership; GEN 136(13)78, on the economic implications: and GEN 136(14)78, on the problems of the fixed exchange rate? They all show conclusively that the consequences to Britain would be catastrophic.

Mr. Healey

The answer, shortly, is "No, Sir."

Mr. Litterick

Why not?

Mr. Healey

If I may give one good reason, I notice that in reporting what purported to be the contents of one of the papers mentioned by my hon. Friend, The Times gave a totally false impression of both its contents and its status.

Mr. Bendall

I do not see that that is an answer. I still cannot see why the papers cannot be published.

Mr. Spearing

Does not my right hon. Friend agree that the Government have practised closed Government on this issue? As he has not had the courtesy to inform the House, will the Green Paper include the substantive conclusions reached on Monday and Tuesday at the Finance Ministers Council? Why did he not tell the House? Does the plan match the eight conditions that my right hon. Friend mentioned in his evidence to the Select Committee?

Mr. Healey

As is normal on these occasions, I have made a written statement which describes the results of the Finance Ministers Council meeting on Monday. The Green Paper to be published tomorrow will describe them in greater detail, as I know my hon. Friend would wish.

On the question of open government, I cannot recall any other Chancellor of the Exchequer giving evidence for 90 minutes to a Select Committee, answering in full every question he was asked on a matter. It comes rather ill from my hon. Friend if he believes what he said about open government.

Mr. Dykes

Does not the Chancellor agree that the papers might have dealt with the important subject of the location of the European monetary fund when it is established in several years time? Would he be in favour of its being located in London?

Mr. Healey

I would rather know what the fund is and what it will do. As that will not be decided for two years, I should like to defer a view as to where it should be located, if and when it comes into existence.