Euro

HC Deb 27 February 2003 vol 400 cc395-7

9. Norman Lamb (North Norfolk)

If he will make a statement on the work being undertaken on the background studies associated with the five economic tests for UK entry into the euro. [99470]

The Chancellor of the Exchequer (Mr. Gordon Brown)

As I reported to the Treasury Committee this morning, 18 studies are being undertaken, including four that I announced in detail this morning, as part of our technical and preliminary work for our assessment of the euro tests.

Norman Lamb

I thank the Chancellor for that answer and I had the great pleasure of listening to his evidence in the Treasury Committee over the past two hours on the studies and background tests. Is it not the case, however, that while the Prime Minister remains passionate about joining the euro, the Chancellor remains deeply sceptical about the economic case? No matter how many background studies we have—I do not know whether there will be more than the 18 already in place— they will not be sufficient to paper over the yawning chasm between the two men.

Mr. Brown

There are those, like the Liberals, who would join the euro as a matter of principle without looking at the economic tests. There are those, represented by the shadow Chancellor, who would never join under any circumstances. There are those, like me, who believe that we should join the euro in principle but must get the national economic interest assessed properly by the five economic tests that we have laid down. It is precisely on that basis that I gave evidence to the Select Committee this morning to set out that the Prime Minister and I both believe in the principle of the euro, but that we must get it right economically for Britain.

Hugh Bayley (City of York)

One of the five tests is on whether joining the euro would create conditions to encourage investment in Britain. When the Treasury looks at the studies that are being undertaken, will it take account of the consequences on inward investment of not joining the euro as well as the consequences of joining it?

Mr. Brown

Absolutely. One of the five tests is what effect being part of the euro will have on investment. Clearly, we have to consider both sides of the debate. Our studies are yielding a great deal of information about what motivates inward investment and what is happening to investment as a whole. Although I cannot tell my hon. Friend the results of an assessment that has not yet been completed, I am sure that he will be interested in the full and detailed results as they affect the economy as a whole and the inward investors that he mentions.

Mr. John Redwood (Wokingham)

When making the assessment, is the Chancellor going to agree with those private sector forecasters who think that the irresponsible housing boom under the Government will be followed by a housing bust in many areas, showing that we have not converged with the continent and should not accept a one-interest-rate-fits-all policy?

Mr. Brown

Those issues are part of one of the studies that is being undertaken. The right hon. Gentleman should wait to see the results of that study on both housing itself and its implications for the rest of the economy. Again, detailed work, which I am sure he would agree is necessary, is being done, but I am not going to take any lectures on the housing market from a member of a Government who put inflation at 10 per cent. and interest rates at 15 per cent., and who caused such unnecessary damage to millions of home owners in this country.

Mr. Nigel Beard (Bexleyheath and Crayford)

If the five tests are satisfied, what is the likely timetable before the United Kingdom joins the European monetary union?

Mr. Brown

That matter will be addressed in the assessment that I will bring before the House after we have completed our work. If the answer is yes, we would move for a vote in Parliament on the issues and hold a referendum in the country. The people would make the final decision. If the answer is no, then I would set out the details of what will happen then.

Adam Price (East Carmarthen and Dinefwr)

Is the Chancellor aware of the Swedish proposal on the creation of a buffer fund to protect employment in the event of that country's entry into the euro? Does he see any merit in the idea of a stabilisation fund for the UK, and does he accept that there would be savings if another study were commissioned? Will he agree to meet representatives of the TUC, which has developed detailed proposals for this country based on the Swedish model?

Mr. Brown

I do not know of the TUC's detailed proposals, but obviously if it wants to put them to me, I shall look at them. The hon. Gentleman is talking about a proposal that is similar not only to the Swedish proposal but to practice in Finland. Of course, we will look at all those details, because that is part of the assessment that we are carrying out.

Caroline Flint (Don Valley)

It is absolutely right that the people of Britain should have the final say. The Leader of the Opposition is on the record as saying: I am for keeping the Pound. If you want a leader who may one day vote to abolish the Pound, I am simply not your man. Does my right hon. Friend believe that the Opposition are willing to wait that long?

Mr. Brown

The issue on the single currency is this—those who would rule it out on principle are saying that even if it were in the national economic interest to join they would not do so because of dogma, which is clearly the wrong position for our country.

Mr. Howard Flight (Arundel and South Downs):

Yesterday, in a speech to CBI London, the Chief Secretary to the Treasury advised that in addition to the Chancellor's five existing tests, the Government's decision on the euro would depend on the European Union reforming its labour and capital markets further. Does the Chancellor seriously believe that, whatever labour and capital reforms he wants, they will be in place by June so that he can assess whether their aims have been achieved? Does he have the Prime Minister's agreement on the new additional test that the Chief Secretary announced in public yesterday?

Mr. Brown

Once again, the hon. Gentleman should do his research.

Mr. Flight

I was there.

Mr. Brown

The shadow Chief Secretary should do his research. To be there is not necessarily to interpret things correctly, as we have found with him on previous occasions. If he looked at the second test, he would see that it is about flexibility and is asking whether there is sufficient flexibility in economies to cope with shocks. That is exactly what the Chief Secretary was talking about yesterday. We will take lectures from the shadow Chief Secretary once he has sorted out the problem of publishing his report on 20 per cent. cuts in public spending.