ERM: Discussions on UK Membership (Hansard, 17 July 1990)

The Paymaster General (The Earl of Caithness)
My Lords, the subject of UK membership of the exchange rate mechanism of the European monetary system has been discussed on several occasions in both this House and another place. The Government are committed to 759 join the exchange rate mechanism when the well-known conditions set out clearly after the Madrid Summit have been met.

§ Lord Stoddart of Swindon
Yes, my Lords; but I am not sure whether that response answers the Question. Is the noble Earl aware that when I heard the ringing tones of Mrs. Thatcher saying that matters must be decided not on the "diktat of government" but by "the democracy of the people", I believed that she actually meant what she said and that the words were not merely empty rhetoric?
Is the noble Earl also aware that whether we join the exchange rate mechanism is a very important question as it will affect the jobs and the standard of living of the people of this country? Is he further aware that they deserve to be consulted in the same way as the banks, people in the City, the CBI and, indeed, even the Governor of the German Bundesbank, Herr Pöh1? Can he say whether there are any means by which the British people can be consulted and not be mere onlookers in this important matter?
If noble Lords will kindly listen, we shall proceed much quicker. I can assure the House that the question is coming. If the Government are able to send out to every household an explanation of their health service reforms, why can they not do the same in the matter of joining the ERM, which is infinitely as important, if not more so?

The Earl of Caithness
My Lords, I think that it would be helpful to the House if I were to quote the exact words used by my right honourable friend the Prime Minister. She said: We know that it is the existence of NATO and its sure defence which have helped to change the direction of Eastern Europe and the Soviet Union from the diktat of government towards the democracy of the people". That is not quite the sense in which the noble Lord, Lord Stoddart of Swindon, transposed it to suit his Question.
As regards employment, which was one of the many questions asked by the noble Lord, I am sure that he will agree that membership of the ERM will reinforce anti-inflation policy, which will be to the benefit of the economy and employment.

§ Lord Jenkins of Hillhead
My Lords, does the noble Earl agree that the Government can be accused of many things in relation to the ERM but hardly of the diktat of government; rather the total confusion and disarray of government?

The Earl of Caithness
My Lords, I agree with the noble Lord in that it is not diktat by government. There has been an enormous amount of consultation and the terms upon which we shall enter have been clearly set out.

Lord Bruce of Donington
My Lords, pending the explanation that Her Majesty's Government may or may not be prepared to give to the people of this country about the implications of joining the ERM, will the noble Earl give the House an assurance that they will not enter it with the exchange rates at the grossly inflated level that they are at present?

The Earl of Caithness
My Lords, we shall enter at the appropriate time.

§ Lord Grimond
My Lords, can the Minister tell us what would persuade the Government in regard to Scotland to get away from the diktat of government and embrace the democracy of the people? In Scotland they hold a very small vote and there is a very large majority against them.

The Earl of Caithness
My Lords, that is a most interesting question. If the noble Lord were to table it, I think it would be appropriate to answer it at that time.

§ Lord Ezra
My Lords, as the noble Earl has reiterated the Government's policy with regard to the ERM—namely, that the Madrid conditions must be met—does he agree that the question of inflation in this country is probably one of the most important? In that connection, is he satisfied that the way in which we calculate inflation in this country and the way in which it is calculated in the other countries of the Community are sufficiently comparable to enable a valid conclusion to be reached?

The Earl of Caithness
My Lords, the noble Lord is right to say that inflation is one of the key ingredients of the Madrid conditions. The way we calculate headline inflation in this country is totally different from the way in which our partners in Europe do so. For that reason we seek to take out the mortgage interest payments and the community charge so as to put us on a more level playing field.

§ Lord Peston
My Lords, will the noble Earl reflect further upon the Question of my noble friend Lord Stoddart of Swindon? I speak as someone who is in favour of joining the ERM; indeed, I would have joined some time ago. Nonetheless, does he agree that this is not just a matter for technical economic analysis? Surely, as my noble friend said, this is a situation in which we must take the people of this country with us. Further, can the noble Earl give us guidance as to what the Government have done in this connection? I am not aware of any effort on their part to persuade the people of this country, in exactly the form put forward by my noble friend, of the desirability—as some of us believe it to be—of joining the ERM.

The Earl of Caithness
My Lords, the debate on joining the ERM has continued for many years. The Government have always encouraged open discussion on it. I agree with the noble Lord in that it is not a matter for high economic theory; it is a matter for everyone in the country. That is why we have sought to involve everyone.

Lord Bruce of Donington
My Lords, the noble Earl said that it was government policy to change the way in which the inflation rate was calculated. Can he tell us whether that is official policy? I ask that question because to the best of my knowledge the Government have endorsed the recommendations of previous committees as regards the present method of calculating the rate of inflation.

The Earl of Caithness
My Lords, I did not make a statement of the type of which the noble Lord accused 761 me. I apologise if I misled the noble Lord and the House. I was explaining to the House in answer to the noble Lord, Lord Ezra, that, to reach a common basis with our partners in Europe, those were the matters that we had to take out of the headline rate of inflation.

§ Lord Stoddart of Swindon
My Lords, will the Minister at least give me the assurance that we will not join the ERM during the parliamentary Recess?

The Earl of Caithness
My Lord, the decision as to when we join the ERM is one that my right honourable friends the Chancellor of the Exchequer and the Prime Minister will make when the time is right for the benefit of the United Kingdom.

§ Baroness Nicol
My Lords, does the departure of Mr. Nicholas Ridley remove one of the obstacles to our joining the ERM?

The Earl of Caithness
My Lords, I am a little surprised at the noble Baroness's question.