Single European Currency and UK Assets (Hansard, 13 June 1995)

§ Lord Henley
My Lords, the statement referred to by my noble friend is incorrect. If the United Kingdom were to join a single currency it would be necessary to transfer part of our foreign exchange reserves to the European Central Bank, receiving in exchange an equivalent claim on that bank. There would, therefore, be an exchange of assets. It is not possible to say with certainty how large the value of that exchange would be, but it is clear that it would be a mere fraction of the sum quoted.

§ Lord Boyd-Carpenter
My Lords, I thank my noble friend for that Answer. If we make such a payment and join the European currency, can we get the payment back if we withdraw?

§ Lord Henley
My Lords, first, the transfer would not be as large as suggested in the European Journal, to which my noble friend referred. Secondly, it would be an exchange of assets and obviously we would have a claim on it. Thirdly, nothing is ever irreversible and there is no point in trying to make one's flesh creep by suggesting that it would be.

§ Lord Barnett
My Lords, does the Minister accept that, given that the statement is inaccurate—which is hardly surprising given that it comes from Bill Cash and the European Foundation document—it is as likely that there will be a loss of £36 billion as it is that we will be asked to eat only straight bananas? Is not the Government's position that it is what is needed by the end of the century and if there is a wholly sustainable convergence it would be sensible then to join, having waited some time to observe the situation, and that if we did not it would be extremely costly and damaging? Does the Minister concede that that is the Government's present position?

§ Lord Henley
My Lords, it is difficult to work out exactly what the noble Lord is asking me to accept because he put a great many acceptances to me. I believe that he is asking what is the Government's position if and when we join the EMU. I can take him no further than the frequent statements made by all Members of the Government on many occasions; that it is too early to 1636 judge whether successful monetary union will be possible by 1999. Thanks to our opt-out, we can consider that matter at the appropriate time.

§ Lord Harmar-Nicholls
My Lords, does the Minister accept that the Answer he gave to my noble friend Lord Boyd-Carpenter may be inadequate? Under Article 107 of the same treaty are we not precluded even from asking questions about what can be done with whatever amount of our reserves we hand over?

§ Lord Henley
My Lords, I do not believe that my Answer was inadequate. As I explained to the noble Lord, Lord Barnett, we can make a decision at the appropriate time, according to the opt-out which my right honourable friend the Prime Minister negotiated. We shall make our decision at that appropriate time.

Lord Bruce of Donington
My Lords, does the Minister agree that the amount of the subscription in terms of foreign exchange is more likely to be in the region of 36 billion dollars as distinct from pounds sterling, and that that is a more realistic assessment of the amount to be transferred? Is the Minister aware that at the same time, under a protocol to the treaty which deals with these matters (paragraph 3 of No. 30), a credit will be created in the United Kingdom's favour for the sum that is deposited? Under what circumstances will it be possible for the United Kingdom to draw down on the corresponding credit which it will be granted under the protocol?

§ Lord Henley
My Lords, the noble Lord asked a number of questions and I shall do my best to answer some of them. He asked whether the correct figure is 36 billion dollars. I believe that the European Journal referred to 36 billion dollars but my noble friend referred to £36 billion. I cannot work out from where either of those figures emerged. The treaty refers to a sum of 50 billion ecu, which would be some £41 billion or 66 billion dollars. Obviously, if we were to join we should pay as our contribution some fraction of that total. What that fraction would be would depend very much on the number of others joining.

§ Lord Cockfield
My Lords, does my noble friend recall that in 1978 when we joined the European monetary system—we joined the system and not the exchange rate mechanism—we similarly had to subscribe to the capital of the system? Can my noble friend say how much profit we have made on the subscription in view of the regrettable depreciation that has since occurred in the value of the pound?

§ Lord Henley
My Lords, I cannot answer that question without notice. It may have helped had my noble friend asked the question in a rhetorical style and given me the answer. I am sure that he is well aware of the answer.

§ Lord Stoddart of Swindon
My Lords, in reply to the noble Lord, Lord Boyd-Carpenter, the Minister said that we could get back the money that we had deposited. Is it not true that Article 109/L4 in the body of the Maastricht Treaty provides that joining the single currency is irrevocable? Does not "irrevocable" mean that that is the end of the matter and we cannot go back?

§ Lord Henley
My Lords, I was simply trying to make the fair historical point that nothing—nothing—is ever irreversible. I do not believe that it is worth trying to make people's flesh creep by suggesting that it is.

§ Lord Boyd-Carpenter
My Lords, is my noble friend suggesting that if, after joining the European currency, we were to withdraw there is any certainty that we should get a penny back?

§ Lord Henley
My Lords, we have not yet decided to join. That is a matter to be considered when we debate the question of if and when we should join.

§ Lord Eatwell
My Lords, is the Minister aware that, whether the UK joins a single currency or not, as regards the City of London's planning for the existence of a single currency it is imperative that City institutions know now the kind of monetary instruments that will be disposed of by a central bank in its pursuit of monetary policy? Yet the Maastricht Treaty states that only the central bank can determine what those monetary instruments are. In those circumstances, monetary union is formally impossible, which may be encouraging to some of my noble friends. What steps are the Government taking to encourage the European Commission or the Council to determine the monetary instruments which will be disposed of by the European Central Bank so that the City of London can plan for and profit from any such eventuality?

§ Lord Henley
My Lords, that question takes us beyond the original Question. I repeat that it is too early to make such decisions, which can be considered later. It is far too early to judge whether monetary union will be possible by 1999. As the Prime Minister said, it will not be possible, and Britain will not be joining a monetary union in 1996 or 1997.

§ Lord Whaddon
My Lords, in view of the extreme complexity of these matters, will the noble Lord be sure to consult his noble friend Lady Thatcher, who has such a profound understanding of them?

§ Lord Henley
My Lords, I am sure that we shall always listen to the advice of one of the most distinguished former Prime Ministers.

§ Lord Hylton
My Lords, is it not desirable that as many as possible of our cross-border financial transactions should be denominated in ecus in advance of any monetary union?

§ Lord Henley
My Lords, I do not believe that that is necessary, but that might be something that we could consider when it is necessary to make those decisions.