HL Deb 14 March 1995 vol 562 cc719-21

2.43 p.m.

Lord Bruce of Donington asked Her Majesty's Government

Whether they propose to support the Commission Proposal (4258/95) for a Council regulation providing for harmonised consumer price indices (CPI's) within the European Community.

Lord Inglewood

My Lords, Her Majesty's Government support the proposed Council regulation, subject to satisfactory negotiation on a number of detailed points.

Under the Maastricht Treaty agreed by Parliament, the construction of harmonised consumer price indices is now required for the monitoring of economic convergence. This index will be additional to existing indices such as the retail prices index (RPI).

Lord Bruce of Donington

My Lords, can the noble Lord tell the House whether the Government themselves propose to use that particular index bearing in mind that they are already using five different ones as the occasion suits them? There are the taxes and prices index; the all items index; the all items excluding mortgage interest index and the all items excluding housing index. There is also the RPIY index which includes other interests. Finally, there is the small-user index designed to meet the position of pensioners and people on very small incomes. That makes five or six indices at the most. Can the noble Lord say on which index the Government propose to place reliance bearing in mind that approval in this particular instance on behalf of Her Majesty's Government will be delivered by qualified majority voting not at Ministerial level but at COREPER level?

Lord Inglewood

My Lords, it is important that we are clear on the basic purpose of this particular index. Noble Lords will know that under the Maastricht Treaty in respect of Stage 3 of economic and monetary union, various convergence criteria are set out, one of which relates to the achievement of a high degree of price stability. That is obviously to be measured by reference to the measurement of inflation. It is stated in Protocol 6 to the treaty that inflation should be measured by means of a consumer price index on a comparable basis taking into account differences in national definitions. That is the reason for the index that we are talking about. If it is an index which proves useful to other people no doubt they will use it.

Lord Boardman

My Lords, will not a harmonised price index mean a harmonised tax regime? You cannot have one without the other.

Lord Inglewood

No, my Lords, I do not believe that it will.

Lord Cockfield

My Lords, is not the most important index of all the GDP deflater which unfortunately was not mentioned by the noble Lord, Lord Bruce of Donington?

Lord Inglewood

My Lords, I thank my noble friend for his expertise in this very recondite area.

Lord Eatwell

My Lords, is the Minister aware that on this side of the House we entirely support the construction of these harmonising indices which can only be valuable in international economic comparisons? Can he also tell us what role the Retail Prices Index Committee will play in the harmonisation procedure? It is overseeing the construction of our own retail prices index and has protected it against the unwarranted advances of successive Conservative Chancellors. Can he also tell us how the procedure is to deal with different structures of expenditures in different countries such as the different composition of housing expenditures?

Lord Inglewood

My Lords, I am reassured to hear that at least in this respect the noble Lord, Lord Eatwell, is in favour of government policies concerning European economic matters. As regards the point made by the noble Lord about the different elements in the index, the important thing to realise is that the proposed index is to be developed in three stages. The difficult problems to which the noble Lord, Lord Eatwell, alludes are to be dealt with at Stages 2 and 3. As of now, the detail of how that will be achieved has not yet been decided.

Lord Eatwell

My Lords, can the Minister tell me what role the Retail Prices Index Committee is to play in the exercise?

Lord Inglewood

My Lords, the proposals which we are currently discussing have been drawn up inter alia in consultation with the Central Statistical Office. I understand that the Retail Prices Index Committee reports to that office.

Lord Bruce of Donington

My Lords, will the noble Lord convey to his noble friend Lord Cockfield my great appreciation for his having directed my activities into another small, specialised area in connection with this matter? Will the Minister tell the House how the Government themselves will deal with the detailed requirements of Annex 1 to this particular directive? That sets out in very considerable detail the information that is required. Within the context of the changeover in the obtaining of statistics which is taking place after January and the swop to a new private enterprise firm, as distinct from the Department of Employment whose spare-time employees have previously been engaged in compiling the index, how is the Minister to provide the information which is required in Annex 1? If he has not already done so, will he please now do so?

Lord Inglewood

My Lords, I can assure the noble Lord that I have examined Annex 1 to the proposal. As he points out, it is a complicated document. It is because of the complications inherent in doing what the noble Lord describes that, as I mentioned earlier, the detail of Stages 2 and 3 have not been agreed. Stage 1 of the proposal essentially involves taking certain items out of the retail consumer price indices—the items differ depending on the member state involved. The discussions in which the Government are currently involved relate to the later stages and deal with the points to which the noble Lord referred.

Lord Clark of Kempston

My Lords, does my noble friend agree that the harmonisation of consumer price indices must depend on the harmonisation of the VAT on consumer goods?

Lord Inglewood

My Lords, no. I do not agree with my noble friend on that.