Exchange Rate Mechanism (Hansard, 6 June 1990)

The Paymaster General (The Earl of Caithness)
My Lords, the position of Her Majesty's Government remains unchanged. The United Kingdom will join the exchange rate mechanism when the Madrid conditions have been met.

§ Lord Ezra
My Lords, is the noble Earl aware that during the second and third weeks of May speeches made by the Prime Minister at the Scottish Conservative Party conference and subsequently by the Chancellor of the Exchequer were reported by newspapers such as the Financial Times, the Wall Street Journal and The Sunday Times as representing a major shift in British attitude towards early membership of the ERM? Is he further aware that as a result of those speeches and of those reports there was a substantial uplift in stock market values? In those circumstances does he not consider it right that this House should be taken a little more into the Government's confidence?

The Earl of Caithness
My Lords, the noble Lord reads into those articles in the press what he wishes to read. My replies on this subject yesterday and today make the Government's position absolutely clear.

§ Lord Nugent of Guildford
My Lords, can my noble friend tell the House at what level of inflation he 1368 considers it would be apposite for the Government to enter the ERM?

The Earl of Caithness
My Lords, before I answer that question I am sure the whole House would like to join me in wishing my noble friend a very, very happy birthday.

Noble Lords
Hear, hear!

The Earl of Caithness
My Lord, the key point regarding ERM entry is not a reduction of the United Kingdom inflation rate in itself; it is that our inflation rate should be on a downward trend and a little closer to that of our European partners on a comparable basis.

§ Lord Stoddart of Swindon
My Lords, as the attempt by Mr. Lawson to enter the ERM by the back door has resulted in the disaster of record high interest rates and a record balance of payments problem, would there be any change and would there be any improvement if the Government now sought to enter the ERM through the front door?

The Earl of Caithness
My Lords, I note that the noble Lord continues to adopt a different view from noble Lords on his Front Bench. I would not draw the same conclusion from the first part of the noble Lord's question as he did; therefore he asks a purely hypothetical question.

§ Lord Harmar-Nicholls
My Lords, will my noble friend urge his colleagues in the Government to resist the elbow jogging tactics of those who seem obsessed with moving to European federation at almost any cost? When joining the ERM is clearly in the best interests of the United Kingdom as well as of Europe, it may be considered, but it would not serve British interests to do so before that time. The Government have no mandate either from the 1979 election or from any subsequent election to do anything less than that.

The Earl of Caithness
My Lords, my noble friend's first question is separate from the Question on the Order Paper. With regard to his second question, my noble friend is absolutely right. We shall join the ERM when it is right for the United Kingdom to do so.

§ Lord Grimond
My Lords, are not the Government expecting inflation now to turn down? The Minister said that we shall join when inflation is on the way down. Has not the time come for that, or do the Government expect it still to go up?

The Earl of Caithness
My Lords, the question of inflation is another matter. If the noble Lord cares to put down a Question on that subject I shall be pleased to answer it.

Lord Bruce of Donington
My Lords, is the noble Earl aware that in his first Answer he was slightly inaccurate in saying that the position of the Government had not changed? Is he aware that the position of the Government is rapidly deteriorating 1369 and has deteriorated since that time? Will he give some assurance that small and medium-sized businesses, which are at the moment paying between 17 per cent. and 18 per cent. for bank facilities, will speedily be relieved and that we shall not enter the exchange rate monetary system until the matter has been redressed?

The Earl of Caithness
My Lords, I entirely disagree with the noble Lord's assertion that the Government's position has deteriorated; I think that the position of the Government is continuing to improve healthily. Regarding his second point, as the noble Lord will know, we are already members of the EMS. We are talking about whether we should become members of the ERM. That decision will be taken. The principles have been agreed, the terms have been set out and the decision will be taken when it is right for the UK to do so.

§ Lord Molloy
My Lords, is the Minister aware that what he has just said completely contradicts what the Chancellor of the Exchequer said 10 days ago when he had the courage to state that we were in for a tough time: unemployment may rise and even inflation may rise a little more? Who are we to believe—the noble Earl or the Chancellor of the Exchequer?

The Earl of Caithness
My Lords, there is no contradiction between what my right honourable friend the Chancellor of the Exchequer said and what I have said today. The noble Lord has sought to widen the Question to such matters as unemployment.