§ 2.43 p.m.
§ Lord SoamesMy Lords, I beg leave to ask the Question standing in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government whether they have taken a decision on whether or not to include sterling into the exchange rate mechanism of the EMS during the lifetime of this Parliament.
§ Lord SoamesMy Lords, I suppose I might have expected such a reply. What I should like to know from my noble friend is this. First, now that the oil price has come a long way down without sterling having suffered, that surely has removed the argument of the petro-currency. On top of that, the relationship between sterling and the deutschemark is satisfactory to sterling now; and, thirdly, it seems to be fairly common knowledge that the Chancellor of the Exchequer, the Foreign Secretary, the governor of the Bank of England and the chairmen of the clearing banks are all in favour. What are the Government waiting for before they make up their minds in a positive fashion?
§ Lord Young of GraffhamMy Lords, this is a matter which is kept under continual review. We do not intend to enter unless there is a clear balance of advantage in favour of us doing so. The views of the Government were stated quite fully by my honourable friend in another place, the economic secretary, when he said in a debate:
The exchange rate mechanism is a fixed, but adjustable, exchange rate system on Bretton Woods lines intended to promote greater economic convergence between its participants, particularly on inflation. The Government's position on membership has been clear throughout. We will be ready to join the exchange rate mechanism as and when we judge the conditions are right for us to do so.I do not think I can add to that.
§ Baroness SeearMy Lords, the Government have told us on innumerable occasions that they will join when they consider that the conditions are right. Will the noble Lord define what the right conditions are?
§ Lord Young of GraffhamNo, my Lords, because I think it would be quite wrong for us to set in advance conditions or circumstances which we consider right. We have to consider the position at the time. I would say to all your Lordships that I have no doubt that had 582 we joined some time ago we would in fact have been worse off than we are today.
§ Lord O'Brien of LothburyMy Lords, would it not serve to quieten this interminable debate on the merits or otherwise of joining the exchange rate mechanism and the European monetary system if the Government were at least to define what they would regard as a "right" time for this purpose? Since the debate began we have had all kinds of time, none of which has seemed to be right. It would help us all if the Government were to tell us what a right time is, and how they define it. The debate continues, and distinguished people are in favour of entering the exchange rate mechanism, not least the Economist, whose views I share.
§ Lord Young of GraffhamMy Lords, I appreciate that it is the view of very distinguished people in our society that the Government should, or should not, do different things, and that has always been the case. There is happily but one Government. It is for the Government to make that decision, and the Government will do so when the Government judge that the time is right.
§ Lord BoothbyMy Lords, may I ask the noble Lord whether he realises that for the last 60 years the whole world has suffered from recurrent economic depressions amounting to crises, causing much unemployment and poverty; and that the primary cause of these depressions in every case was the lack of an efficient and viable international monetary system? The noble Lord talks about keeping it under review. It has been kept under review for 60 years. The last serious attempt to tackle the problem was made at the Genoa Conference of 1922 by Mr. Lloyd George, who unfortunately fell from power before he could carry it out. Does the noble Lord not think that the time has come for us to have another stab at it, by joining the EMS, and joining it now?
§ Lord Young of GraffhamMy Lords, if we look back over the last 60 years of human progress we shall find that the world is an infinitely better place than it was 60 years ago in terms of living standards of the average citizen. Of that there can be no doubt. Of course we have unemployment. I hope very much that unemployment will one day be a thing of the past. These are two entirely separate matters. What we must do is, first, to have a sound monetary policy for the United Kingdom; secondly, we must play our part as a full and committed member of Europe. When the two go together, and when we decide it is time to join the exchange rate mechanism, I am sure that the Government will do so at the first possible opportunity.
Lord Campbell of CroyMy Lords, have the Government taken fully into account the opinion of the CBI and others representing British industry and commerce that conditions at present are fortuitously favourable for Britain joining the exchange rate mechanism? Can my noble friend explain why the Government and these other bodies have reached different conclusions?
§ Lord Young of GraffhamMy Lords, it is for the Government to listen to advice, but it is for the Government to make up their own mind, and the Government will do that. Exports and the battle to restore the British economy are about much more than just exchange rates. So far as the CBI is concerned, the CBI knows that it has as much to do with goods being delivered on time, and with quality and design, as it has with simple exchange rates.
§ Lord Stoddart of SwindonMy Lords, is the noble Lord aware that this matter of the EMS is rather esoteric so far as most of us are concerned? Since he will not give the reasons why we should not join, will he give the reasons why he thinks, or why the Government believe, that it has been in our favour not to have joined up to the present time?
§ Lord Young of GraffhamMy Lords, I will clearly give the reason why the Government do not believe that we should join at this time. It is because we do not consider that there is any clear balance of advantage in our doing so today. The moment we do, we shall join.
§ Lord SoamesMy Lords, is my noble friend aware that surely the time has come? We have been arguing about this for a long time, and it is always the same answer—"When the time is right". What is right in this matter? I do not want to repeat my arguments, but this really is not good enough on the part of the Government. Given the present circumstances compared with what they were a year ago, what can be "righter" than today?
§ Lord Young of GraffhamMy Lords, I have no doubt that the same argument was used one year ago and two years ago, but I shall draw all that is said in your Lordships' House to the attention of my right honourable friend the Chancellor.
§ Lord Stoddart of SwindonMy Lords, with respect to the noble Lord, he really did not answer my question, and I am sorry he did not. I asked him why it had been to our advantage to remain outside the exchange rate mechanism up to date. He should surely be able to tell us that.
§ Lord Young of GraffhamMy Lords, I hardly think this is the time or place for a lecture on economics. In the view of the Government there is no clear balance of advantage at this time for us to join. Until there is we shall not join.
§ Lord EzraMy Lords, is the noble Lord aware that it is a source of great mystification to our friends on the Continent why in this particular conjunction we have not joined the exchange rate mechanism? It is a source of great mystification to a large number of people in this country why we are not increasing our links with Europe in this very desirable manner. Will the noble Lord not agree that the Government's total refusal to give us reasons for the present position is very unnerving to those of us who believe that by increasing our links with Europe we shall achieve greater success economically and politically in the world?
§ Lord Young of GraffhamBut, my Lords, we are a full member of the European monetary system. We deposit 20 per cent. of our gold and dollar reserves with the European Monetary Co-operation Fund. We participate fully in all discussions; but what we have not done at the present time is to deem that the time is right to join the exchange rate mechanism. I have no doubt at all that that time will come.
Lord MorrisMy Lords, does my noble friend agree that joining the European exchange rate mechanism is a harmonisation of the greatest importance which must be done with the greatest care, for until wage levels, net effective incomes and gross domestic products are in harmony it is difficult to harmonise? In fact, to harmonise where there is no harmony is, I suggest, dangerous.
§ Lord Young of GraffhamYes, my Lords, I look forward to the day when we can say that unit labour costs in British industry are fully competitive with those of our European competitors.