§ Q3. Mr. JanmanTo ask the Prime Minister what assessment he has made of the benefits accruing from a single currency in the European Community to the United Kingdom and other European Community countries either now or in the future.
§ The Prime MinisterTheoretically, a single currency within a single trading area can save industry the risks and costs of exchange rate transactions. It also saves ordinary travellers cost and inconvenience. Of course, all those advantages apply to a common currency such as that which the United Kingdom has proposed.
But the economic benefits of a single currency can be exaggerated and they carry economic risks with them. If widely divergent economies are forced into the straitjacket of a single currency, the strains in the system may be unsustainable.
§ Mr. JanmanI am grateful to my right hon. Friend for that reply. Was he in the Chamber last week to hear the critical but interesting observation that a federal state bears three distinguishing marks? One of those marks is the existence of a single currency and of a central bank. Does my right hon. Friend agree that the sentiments behind that observation, made by the right hon. Member for Bethnal Green and Stepney (Mr. Shore), fly in the face of the Labour party's policy on Europe?
§ The Prime MinisterI entirely agree with my hon. Friend. It is clear that the Labour party is split on the question of Europe.
§ Sir Russell JohnstonIf the Prime Minister is saying that he agrees that a single currency is acceptable in principle, is not it also logical that a European central bank should control European-wide interest rates?
§ The Prime MinisterWhat I have said repeatedly about a single currency is that if it is market driven and if it is required, it is acceptable to us in principle. However, as the hon. Gentleman will have heard me say yesterday, we have maintained our reserve on the prescriptive single currency which is at present before the Community.
Mr. FayellWith my right hon. Friend's successful Luxembourg conference behind him, will he reject any new proposals to interfere with the Government's right to tax, to spend and to fix interest rates, as otherwise the non-imposition of a single currency could be but a hollow victory?
§ The Prime MinisterWe are still at the very early stage of negotiations on economic and monetary union. I have already made it clear that I am as jealous as any other hon. Member of the rights of the House.
§ Mr. SpearingIs the Prime Minister aware that last Friday I asked the Financial Secretary to the Treasury what studies had been made into the benefits for the United Kingdom of economic and monetary union? He answered by referring in column 541 to a written answer that he had given to me on 7 December at column 216. Both answers showed that no study had been made of the benefits. As the First Lord of the Treasury, will the Prime Minister tell us why that is so?
§ The Prime MinisterI set out in my original answer to my hon. Friend a few moments ago what the theoretical advantages of a single currency would be. The hon. Gentleman may care to read that answer.