The City of London and the European Union (Hansard, 6 March 1997)

§ Lord Mackay of Ardbrecknish
My Lords, as the Government have no intention of withdrawing the United Kingdom from the European Union, no analysis of the effect of withdrawal has been made.

§ Lord Hooson
My Lords, if that is so, does the noble Lord agree with the sentiments expressed yesterday by the noble Lord, Lord Prior, who opened the debate, when he said: I cannot believe that any serious industrialist would advocate withdrawal"?—[Official Report, 5/3/97; col. 1845.] Would he not agree that if one substituted the word "banker" one could safely express the same sentiment?

§ Lord Mackay of Ardbrecknish
My Lords, as I am neither an industrialist nor a banker I should like to go further and suggest that "person" might be the right word.

§ Lord Clark of Kempston
My Lords, does my noble friend recollect that very recently the Lord Mayor of 1967 London made an unequivocal statement in a speech that whether we join EMU will not affect the business of the City of London because most of the business in the City of London is not only with Europe but it is worldwide? Consequently, following that, will my noble friend confirm that, on a worldwide basis, 36 per cent. of business as regards the exchange rate is done by the City of London and only 4 per cent. of that is within Europe? Will my noble friend agree that the City of London will remain a major financial centre and that it does not do any good to start scaremongering about that?

§ Lord Mackay of Ardbrecknish
My Lords, there are two very distinct issues here: the first is our membership of the European Union, and I hope that I have made it abundantly clear that the Government's policy is that we should continue that membership; and the other is the question of whether we should join a single currency. Those are two separate issues.
As regards the City and a single currency, I understand that opinions in the City are divided but, as my noble friend said, it is absolutely true that the City of London does a great deal more business than just with the European Union. It is the world's largest international insurance market and is the second largest fund management centre after Tokyo. Indeed, there are more foreign banks here in London than in any other city in the world. Those three propositions show the worldwide interests of the City.

§ Lord Jenkins of Putney
My Lords, in view of what has been said on the other side of the House, is the Minister aware that a recently published occasional letter from the Institute of Economic Affairs said that there is no foundation whatever for the generally held opinion that withdrawal from the EU would be economically disastrous?

§ Lord Mackay of Ardbrecknish
My Lords, I think I heard the question correctly and I think I heard the negative in it. We should remember one or two very simple facts as regards our position vis-á-vis the European Union. Nearly 60 per cent.—58.2 per cent.—of our trade in goods is with the European Union. On the last Question, we underlined the importance of the manufacturing industry. The importance of the European Union for our manufacturing industry is clear to see. As I said previously and I say again, this Government have not even contemplated the proposition that we should withdraw from the European Union.

§ Lord Pearson of Rannoch
My Lords, nevertheless, is my noble friend aware that only 9 per cent. of our economic activity takes place with Europe and given that we trade in deficit with Europe, can my noble friend give the House any good reason, rather than a flat statement, as to why we should not leave the Treaty of Rome and negotiate access to its single market, similar to the access enjoyed by Switzerland and Norway and, I may say, almost every other country on earth (several 1968 of whom are actually increasing their exports to Europe far faster than we are), to the immense advantage of the City of London and of the country at large?

§ Lord Mackay of Ardbrecknish
My Lords, it seems to be a fairly ludicrous proposition that we should leave the single market and then try to renegotiate entry into it.

§ Lord Eatwell
My Lords, will the noble Lord confirm the story in the Financial Times on 22nd February that the Government have abandoned legislation on the contractual status of the euro in UK financial markets? Is he aware also that Mr. Tim Sweeney, Director General of the British Bankers Association, said that that abandonment was doing considerable damage to the development of euro contracts in the City? Finally, will he confirm that the Chancellor has told the European Commission that he will fight to pass that legislation after the election? Why has that abandonment taken place?

§ Lord Mackay of Ardbrecknish
My Lords, the situation is, as your Lordships will be well aware, that the parliamentary timetable at the moment is fairly crowded and we believe that we shall have plenty of time after the election to bring forward a variety of legislation, including that discussed by the noble Lord.

§ Lord Haskel
My Lords, does the Minister not agree that opinion on EMU is fairly divided in the City and that that justifies Labour's view that it is best to wait for more information to be available and that it is better to wait and see?

§ Lord Mackay of Ardbrecknish
My Lords, I suppose that it justifies Labour's view but it justifies much more the Government's view, which, of course, the party opposite has merely followed over the past many months in relation to Europe, as I have said on a number of occasions.