HL Deb 19 December 1996 vol 576 cc1616-9

11.23 a.m.

Lord Willoughby de Broke asked Her Majesty's Government:

Whether they agree with the European Commission's recent proposal that the convergence programmes which are now submitted on a voluntary basis should be made compulsory for countries not participating in the single currency.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)

My Lords, yes, making the reports compulsory is a sensible idea. The Government believe in international and mutual surveillance of economic performance. We have already signed up to independent examination of our economic health by the IMF, the OECD and the G7 as well as the European Union.

Lord Willoughby de Broke

My Lords, I thank my noble friend for that reply. However, does he not agree that this is another example of the ratchet effect of so much European legislation against which the Government were warned three and half years ago in debates in this House on the Maastricht Treaty? If we are already doing what is required under the proposal, why should it be compulsory? Cannot my noble friend say that our reporting procedures will remain as they are now; that is, entirely voluntary?

Lord Mackay of Ardbrecknish

My Lords, I do not believe there has been much of a rush about this. The decision to produce convergence reports came into being with the signing of the Single European Act, which we agreed to as a government when my noble friend Lady Thatcher signed up for the Act and it was passed through both Houses of Parliament. For a while the submitting of convergence reports was voluntary. However, some member states have been dilatory about making the reports and therefore it is sensible to have the making of them compulsory.

Lord Barnett

My Lords, why is the Minister so polite to his noble friend? Why does he not repeat what his right honourable friend the Chancellor of the Exchequer said to those who hold the same views as his noble friend? Does he accept that economic convergence is sensible for those who do not participate as well as for those who do participate in economic and monetary union? I am glad to see him nodding. I hope he will confirm that and perhaps tell his noble friend what he thinks of him.

Lord Mackay of Ardbrecknish

My Lords, the noble Lord, Lord Barnett, has heard me say on a number of occasions that we believe that the policies on convergence are entirely consistent with the sound economic policies we are running in this country; that is, sound public finances and low inflation which lead to the kind of results we saw yesterday with a record reduction in unemployment to below the 2 million figure.

Lord Marlesford

My Lords, if, as now seems possible, there is a period when the euro is legal tender in the countries that intend to have a single currency before the single currency is introduced, do the Government see any problem in it being legal tender in this country also? Does my noble friend agree that to do that would not in any way prejudice our right to opt out from the single currency?

Lord Mackay of Ardbrecknish

My Lords, that question is a long way away from the convergence criteria. One of the documents we discussed in this House two weeks ago concerned the status of the euro in the City of London and in our economy, whether we are in or out. I can confirm that, whether or not the euro is accepted currency in this country and is interchangeable, it will not have any effect on the decision we make as to whether we go in or stay out in the next Parliament.

Lord Bruce of Donington

My Lords, is the Minister aware that the convergence criteria themselves, as set out in Protocols 5 and 6 to the Treaty of Maastricht, are extremely flexible and capable of a variety of interpretations? Is he further aware that the statistical material upon which ultimate decisions are made in this matter is placed firmly in the hands of the Commission? The Commission has shown a degree of flexibility, particularly with regard to the recent actions of the French Government in connection with pension funds. Will the Minister agree that it is necessary to have some firming up as to what the criteria are to be in the hope that they will not be the same as those that guided Her Majesty's Government in the late 1930s?

Lord Mackay of Ardbrecknish

My Lords, I am afraid that I cannot remember the late 1930s and, anyway, we live in a quite different world today. The point in relation to the European Commission looking over the figures is one I have answered previously. It is essential that the figures provided are based on some kind of firm and uniform basis. For that reason I do not see anything wrong with the Commission making judgments on whether the figures are on the same basis. In relation to convergence, we have a little time to go before making the final decision as to who has and who has not converged. Obviously, all the factors will be taken into account, including the point I have made on a number of occasions; that is, that convergence is not for the one day on which one makes the judgment. It is also a judgment that the convergence is likely to stick. That is why the stability pact for the position afterwards is so important.

Lord Dixon-Smith

My Lords, in the unlikely event of there being a change of government some time next year should not Members on both sides of the House welcome the fact that the convergence criteria will be compulsory? Members on the Benches facing us should welcome it because they would find their opportunity for risky financing somewhat restricted and Members on this side of course should welcome it for precisely the same reason.

Lord Mackay of Ardbrecknish

My Lords, my noble friend makes a very good point about the importance of the convergence criteria. Whether in or out, it must be in the interests of the United Kingdom that the economics of all the member states of the European Union are run in a sensible and stable way. As I have pointed out to your Lordships before, the European Union is a very important part of our economy. Half our exports go there. It is therefore vitally important to us that our continent is economically stable. The convergence factors are hugely sensible. I welcome almost daily the shifts made by the party opposite as it moves more towards our position and further away from the position where it seemed to be saying that it would not put British interests first but would sign up to the euro regardless of the interests of Britain; that it would move from no opt out to agreeing the opt out and from no referendum to a referendum; and, I understand, most recently, from saying that it would never be alone or isolated in Europe to saying that it would use the veto. I do not know what will come tomorrow.

Viscount Chandos

My Lords, does the Minister accept that the changes on the part of his side of the House make any changes on our part look very small? Can he confirm that in writing to Father Christmas he and his right honourable friend the Prime Minister included the wish that their party would take a constructive but critical approach to European matters rather than display a degree of paranoia that cannot help in negotiations with our European partners?

Lord Mackay of Ardbrecknish

My Lords, that was a good try. I shall endeavour to be generous as it is Christmas time. The Government's position over the single currency has been consistent for many years now. We negotiated an opt-out at Maastricht; we said we would take a decision when the time was right and take it in the interests of the United Kingdom; and we would have a referendum. On all those points over time the Labour Party started by opposing us and ended up by saying that we were right. Clearly, the country would be far better off with us running it for the next five years.