HL Deb 21 November 1996 vol 575 cc1341-4

Lord Bruce of Donington asked Her Majesty's Government:

Whether, well before the European Council to be held in Dublin on 13th and 14th December, they will take steps to prevent any participation by the United Kingdom in the so-called economic stability pact as proposed by the European Commission.

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

My Lords, the Commission's proposals for a stability pact, which involves fines for member states with excessive deficits as envisaged in the Maastricht Treaty, would apply to member states participating in EMU. Thanks to the opt-out which the Prime Minister negotiated, the United Kingdom will only join the single currency if there is a separate decision to do so by Government and Parliament.

Lord Bruce of Donington

My Lords, I am most grateful to the noble Lord for his reply. Is he aware that an examination of the Commission's proposals discloses a degree of ambiguity in its wording? In particular a definition of participatory member states came to the attention of the Standing Committee in another place dealing with these matters. As a consequence, a Motion, number 27, was put down on the Order Paper in another place which is due to be discussed. It was supported by 200 Members in another place and withholds approval until the matter has been before the whole House. Will the noble Lord bear in mind that although we sit in a different place and have a different function he is a member of Her Majesty's Government and is responsible for the conduct of business in both places? Will the noble Lord say whether or not the matter at least can be brought before Parliament rather than being rushed through as it has been and as is indicated in this volume of documents which have cascaded over us in the past fortnight?

Lord Mackay of Ardbrecknish

My Lords, I do not think that it would be for me, in your Lordships' House, to comment on what my right honourable and honourable friends and the business managers in another place should do in response to a Motion on this morning's Order Paper. I understand that a committee of this House, under the chairmanship of the noble Lord, Lord Barnett, has already had a hearing on the subject and has taken evidence.

Lord Willoughby de Broke

My Lords, in view of the welcome statement by my right honourable friend the Prime Minister that he is prepared to block EU business if it is in Britain's interest to do so, will my noble friend on the Front Bench say whether we are prepared to block the stability pact in order to solve the problem of quota hopping by our EU partners?

Lord Mackay of Ardbrecknish

My Lords, as my right honourable friend the Chancellor has said on a number of occasions, the objectives of the stability pact are wholly admirable. They are the objectives of anyone trying to run a sensible economy whether in or outside the EMU. I do not see how we can veto something which points in the right direction, whether in or out of the EMU.

Lord Barnett

My Lords, I am glad that the Minister has got round almost to answering the first Question. Will he now confirm that the Chancellor of the Exchequer agrees and favours the idea of a stability pact for the obvious reason that it is to the benefit and in the best interests of the UK whether we are in or out? At the same time will he confirm that under Article 104c—I hope that my noble friend Lord Bruce of Donington does not mind my quoting an article occasionally—any decision as regards fines would have to be taken by a unanimous vote of the Council?

Lord Mackay of Ardbrecknish

My Lords, there is some disagreement still so far as concerns fines. I believe that the Germans would still like the fines, and so on, to be automatic. However, our position is that the decision should be taken in the Council after considering the matter in the round. It is worth saying that we only reach a fines procedure if, first, we agree to join the EMU and are therefore in; and, secondly, if we actually run excessive deficits. I hope that that answers the second part of the question.

I believe that my right honourable friend the Chancellor has always made clear that a stability pact is a sensible way to proceed. There is little or no point in having convergence criteria, if one does not have some discipline in order to keep those who join having obeyed the convergence criteria within the limits of the convergence.

Lord Shaw of Northstead

My Lords, does the House agree that it is of the utmost importance that we participate to the fullest extent in the preparation of the stability pact? Is it not a fact that if the pact comes about it will be one of the most important agreements for the well-being and future of the European Community?

Lord Mackay of Ardbrecknish

My Lords, I agree with my noble friend. Whether we decide to go into the EMU or to stay out, if EMU comes about it is absolutely sensible that it is stable. One of the ways to keep it stable is to have some form of stability pact that, for example, prevents those member states who are in the EMU running up excessive budget deficits.

Lord Eatwell

My Lords, we are grateful to the Minister for having taken the matter forward and having confirmed that the Government are in favour in principle of the stability pact. He mentioned earlier that some form of discipline would be needed to ensure that a stability pact was obeyed. What forms of discipline do the Government have in mind?

Lord Mackay of Ardbrecknish

My Lords, perhaps I may suggest that the noble Lord borrows the papers from his noble friend Lord Bruce of Donington. He will then see what is in mind.

I appreciate that the Labour Party is constantly looking to me for advice on this matter. For the past two-and-a-half years when I have discussed EMU from this Dispatch Box, it has argued with me and sneered at me in various ways. In each case it has come round, first, to approving the opt-out; and, secondly, to approving the taking of the decision at the right time in the interests of Britain. It has now come round to a referendum. I am not surprised that the noble Lord seeks advice.

The stability pact envisages that any country which has, or moves into, excessive deficits will be asked to explain how it will prevent such deficits or how it will sort the matter out. The provision goes further. It provides that if countries do not sort the position out but move into deficits, in the final analysis they can be fined. There are a number of other issues. However, I commend the paper to the noble Lord.

Lord Eatwell

My Lords, the Minister referred earlier to alternative forms of discipline which the Government favoured. Will he tell us what they are?

Lord Mackay of Ardbrecknish

My Lords, I do not think that I referred to alternative forms of discipline in the way that the noble Lord suggests. I said that the fines system is there. There is some disagreement as to whether it should be automatic or agreed by the Council of Ministers. However, apart from that, the position of the fine as the longstop is up for discussion. It remains to be seen how the member states decide to agree on that issue.

However, what is without doubt true—I hope that the noble Lord agrees with me—is that if the countries join the EMU, having met the convergence criteria, there have to be some arrangements to ensure that they do not then promptly go against the very criteria which brought them into the EMU.

The Earl of Onslow

My Lords, as my noble friend agreed, this is one of the most important steps that the EU will take and, as he said, there are great differences between the Germans, the French and ourselves on the process of the stability pact. Would it not therefore be much more sensible, even if another place will not hold a debate in government time, for this House, which is full of very clever people, to hold a similar debate?

Lord Mackay of Ardbrecknish

My Lords, I hope that my noble friend is not asking me for assent or dissent in relation to the last part of his question. I do not believe that the differences are great. As I explained quite clearly, there is no difference in the principle that we should have a stability pact to ensure, as the name suggests, the stability of any EMU that comes into being. That must be in the interest of everyone, in or out, approving or disapproving.

Lord Bruce of Donington

My Lords, on the assumption that the noble Lord has in fact read the stability pact in draft, will he give the House an unequivocal assurance that on his reading of it the United Kingdom, if it decides not to participate in economic and monetary union, will not be subject to any penalties whatsoever under Article 104c of the treaty?

Lord Mackay of Ardbrecknish

My Lords, the position as I understand it is that there will be a procedure for those who remain out; they will be required to submit convergence programmes. But the next step, to move into the penalties, will not fall on the "outs". The penalties will be there only for the "ins".

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