The Euro (Hansard, 16 January 1997)

§ 1. Mr. Heathcoat-Amory
To ask the Chancellor of the Exchequer if he will estimate the cost to the United Kingdom economy of converting to the euro. [9515]

§ 11. Mr. Gordon Prentice
To ask the Chancellor of the Exchequer what estimate he has made of the costs to the United Kingdom Government of transition from the pound to the euro. [9526]

§ The Chancellor of the Exchequer (Mr. Kenneth Clarke)
The Government have not yet made any full assessments of the transitional costs to the Government or to the economy of introducing the euro. We will make an assessment of such costs at the appropriate time as part of the assessment of whether the United Kingdom should participate in the single currency.

§ Mr. Heathcoat-Amory
As we must decide this year whether to join the euro, and as the cost of doing so would run to many billions of pounds because all business systems, computers and shop tills would have to be changed, does my right hon. and learned Friend think that a welcome contribution to the debate, which I know that he wants, would be to make and publish such estimates? Have estimates been made of the direct cost to Government Departments such as the Inland Revenue, Customs and Excise and so on? If so, will he undertake to publish them at an early date?

§ Mr. Clarke
If the euro were to go ahead on the timetable contemplated, and we were to join, Government Departments of the sort that my right hon. Friend cited would not have to change their accounting systems until 2002, when notes and coins are intended to be introduced. We are in close contact with the banking and retailing world and a great deal of consultation has taken place. When the sensible time comes for making a full assessment of the choice facing the United Kingdom, things such as compliance costs will obviously be relevant. By then, we should be able to produce some reliable figures and estimates.

§ Mr. Prentice
Would not the costs be very considerable? In the 1960s, the Government decided to decimalise five years before D-day and the relevant 438 legislation was on the statute book four years before. Why does the Chancellor think that the country can make this momentous and irreversible decision, with euros coming to the United Kingdom in January 2002 and the pound disappearing in June of that year, in less time than it took the country to decimalise in 1971?

§ Mr. Clarke
Member states are considering the precise transitional arrangements. The British Government are contributing to the necessary rules and regulations that would govern the transition to make it less expensive and to reduce the costs to an acceptable level. As I said, on the strictest interpretation of the timetable, we are talking about a changeover of notes and coins by 2002. At the moment, the sensible thing is to wait and see precisely what the transitional arrangements will be and to continue discussions with banks and retailers. Banks and many financial houses will have to change their systems anyway if the euro is formed by other countries, because I expect much trading in the euro to take place in the foreign exchange markets in the City of London.

§ Mr. John Townend
Does my right hon. and learned Friend accept that the cost of introducing the euro, which everyone accepts will run into billions of pounds, will have to be paid for by increases in taxes and prices? If we have the same experience as we had with decimalisation, conversion prices will be rounded up. Will not the introduction of the euro therefore result in a significant increase in inflation, pushing up prices and feeding into higher wages and costs?

§ Mr. Clarke
I think that it is an argument; I am not sure that it is a fact. I agree that it is perfectly legitimate to claim that there will be substantial transitional costs; the Government must be in a position to estimate them and will do so at the sensible time when we face the choice. I well remember taking part in the controversy about decimalisation. The debates were still going on when I first arrived in the House. My only recollection of decimalisation is that, after much agitated debate running up to it, the changeover was almost a non-event.

§ Mr. Gordon Brown
Following the discussions in Dublin on the euro, its costs and other matters, the Health Secretary said that he favoured renegotiating our position in Europe and was supported by the Prime Minister, who said that he favoured renegotiation. This morning, the Chancellor said that he does not think that that means renegotiating. Who speaks for the Government? Does the Chancellor support the Prime Minister's position on renegotiation?

§ Mr. Clarke
We have a clear position on negotiating in the context of the intergovernmental conference. We have produced a White Paper, and have set out a clear negotiating position. I have not the first idea what the Opposition's view of any of that is; they have not produced any such document, and this is one of the many areas where it is not possible to get any straight answers out of them.