European Central Bank Proposal (Hansard, 20 April 1990)

The Paymaster General (The Earl of Caithness)
My Lords, we believe that it is premature to make detailed plans for further stages of economic and monetary union before Stage One has even begun. We have expressed our reserve on the monetary aspects of EMU beyond Stage One, including the proposed European system of central banks.

§ Lord Ezra
My Lords, will the noble Earl comment on the widespread press reporting after the recent meeting of European Community finance ministers at Ashford Castle in Ireland to the effect that there was a noticeable softening of the British attitude towards the possibility of moving ahead with monetary union and particularly with the creation of a European central bank? Will he furthermore reassure the House that, in any discussions on a European level of these matters affecting future monetary and financial arrangements, the Government will bear carefully in mind the need to safeguard the position of the City of London as the financial centre of Western Europe and will not jeopardise that by appearing to be standing aside from the mainstream of development?

The Earl of Caithness
My Lords, regarding the noble Lord's first question, I hope that he was not beguiled by the press reports but read the statement that was issued by my right honourable friend the Chancellor of the Exchequer afterwards which made it perfectly clear that the British position had not changed. Regarding the second question and the position of the City of London, of course we are keen to see the City of London retain its pre-eminent position.

§ Lord Barnett
My Lords, I recognise and agree with the Minister that without knowing much more about a European central bank it is impossible at this stage to decide whether or not one wants to join it. However, can he say whether the Government are in favour in principle of joining a European central bank?

The Earl of Caithness
My Lords, it was made perfectly clear in the debates in another place and in this House that the mood of Parliament was that we should not go to Stage Three, including a European central bank.

§ Lord Kennet
My Lords, do the Government recognise that it is possible that a European central bank could be created without the participation of this country? What likelihood do they place on such an institution being located in London? What relationship do the Government see between a European central bank—whether or not it includes Britain—and the proposed East European development bank? Would it not be a pity if Britain were excluded from a European central bank in view of the likely preponderant role of that bank in setting up, financing and collaborating with the East European development bank?

The Earl of Caithness
My Lords, that is a little wide of the Question on the Order Paper. The noble Lord has also asked me a number of hypothetical questions.

§ Baroness Seear
My Lords, will the noble Earl explain a little further the answer that he gave to the question before the last one when he said that we should not go to Stage Three? Does he mean that we should never go to Stage Three or does he mean that we should go when the time is right?

The Earl of Caithness
My Lords, the Government have spelt out clearly on a number of occasions their attitude towards Stage Three. I said that the gist of the Government's position was supported by both Houses in the debate.

§ Lord Monson
My Lords, does the noble Earl agree that it is a fallacy to imagine that central banks can ever be wholly immune from political pressures, generally in favour of inflationary policies, particularly when countries such as Greece are involved? Does he also agree that the supposedly Olympian Bundesbank has been leant on heavily by the West German Government to hold down interest rates pending the unification of the two Germanics even though on the basis of purely economic considerations a rise in interest rates would have been justified?

The Earl of Caithness
My Lords, the position of any bank depends on its terms of reference. The extent to which a bank is genuinely independent varies from country to country.

Lord Bruce of Donington
My Lords, in view of the Governor of the Bank of England's interesting admission that bankers can sometimes make major 234 policy mistakes, and in view of the conduct, which some have called irresponsible, of a very large number of banks towards Third World indebtedness, will the noble Earl give the House an unequivocal undertaking that his Government will not under any circumstances take steps that would affect the right of the British Parliament to determine fiscal, economic and financial policy within the United Kingdom and that that will remain exactly as it is now?

The Earl of Caithness
My Lords, the noble Lord makes a very clear statement of his position on the matter. The Government have made a very clear statement of their position. As the noble Lord will know, the inter-governmental conference is due to start later this year, in which we shall play a very active part.