§ 2.57 p.m.
§ Lord Barnettasked Her Majesty's Government:
When they intend to join the exchange rate mechanism.
§ Lord McIntosh of HaringeyMy Lords, the Government have no intention of rejoining the exchange rate mechanism.
§ Lord BarnettMy Lords, I think I thank my noble friend for that Answer, which was not unexpected. I take it that my noble friend has seen the statement, with which I am sure he would agree, made by my right honourable friend the President of the Board of Trade yesterday. She said that a major reason for the driving-up of the pound is not necessarily interest rates but rather not being a member of EMU. Therefore, in the circumstances, does the Minister not think it would be helpful to announce, once the pound is stable—I hope not before too long—that we have it in mind to join the ERM at least before the end of this Parliament if we have it in mind to join EMU at the start of the next?
§ Lord McIntosh of HaringeyMy Lords, I am not quite sure whether I accept my noble friend's summary of the speech yesterday of my right honourable friend the President of the Board of Trade. But whatever she said, I agree with her. I believe that my noble friend is making a distinction, which I also do not accept, between rejoining EMU and rejoining the exchange rate mechanism. What we have said about rejoining EMU—which is the more important issue—is that we need a considerable period of sustained stability and convergence. That does not necessarily imply that we have to join the ERM in advance.
§ Lord TaverneMy Lords, will the Minister urge the Chancellor of the Exchequer not to make any hasty decision or any irrevocable commitment against joining the ERM? Do the Government not recognise that at the right time, when the pound is perhaps somewhat lower than it is at present, a decision to join at 15 per cent. below the then current rate might exercise a useful downward pressure on the value of the pound? Further, do the Government accept that, if they are to join a monetary union, there must be a link between the pound and the euro for at least two years?
§ Lord McIntosh of HaringeyMy Lords, my right honourable friend the Chancellor of Exchequer has no 755 need of urging from me not to make hasty decisions. As to the issue of the precondition of the exchange rate mechanism before joining EMU, I hope that the noble Lord will agree that the important issues are price stability and the reduction of fiscal deficits. The exchange rate should be seen as the outcome of other economic policies. Under those circumstances, the exercise of sensible judgment by those concerned will include looking to that stability rather than to the formality of rejoining the exchange rate mechanism.
§ Lord GisboroughMy Lords, will the Minister assure the House that before any permanent decision is taken there will be a proper referendum which will enable the whole country to give their opinion?
§ Lord McIntosh of HaringeyMy Lords, the Question is about the exchange rate mechanism. I do not believe that we are committed to a referendum before that time. I believe that the noble Lord is referring to economic and monetary union. We have already made it clear that, before such a step is taken, the Cabinet and the Labour Party will make a recommendation to the people of this country through a referendum.
§ Lord GrenfellMy Lords, does my noble friend agree with the reported remark by the Governor of the Bank of England that the markets' current fears about the strength of the euro will to quite a considerable extent be allayed by the eventual announcement of the presidency of the European Central Bank and its getting down to work?
§ Lord McIntosh of HaringeyYes, my Lords; I am sure that the decision which will be taken on 2nd and 3rd May of this year will overcome some of the speculative fears which have been in evidence of a weak euro. That will help with the result which my noble friend anticipates.
§ Viscount MountgarretMy Lords, does the Minister agree that the phrase, "at the right time", is very well worn and much used? Therefore, can he tell the House precisely what is meant by it and whether the circumstances "at the right time" are foreseen to be sustainable continually?
§ Lord McIntosh of HaringeyMy Lords, the Government have spelt out what they mean by, "at the right time", on a number of occasions. Indeed, I have no hesitation in repeating it: we are looking for a period of sustained stability and convergence. Clearly that cannot be achieved overnight. However, at the same time, and as the noble Viscount will recognise, we see this as a matter upon which the people of this country should be consulted.
§ Lord Mackay of ArdbrecknishMy Lords, is it not the case that before we can join a single currency we have to be in membership of the ERM for at least two years? Alternatively, is that a condition which will be fudged in exactly the same way as was the convergence 756 criteria recently, which has caused the markets to view the euro as a potentially weak currency and which has led inevitably to an increase in the value of sterling?
§ Lord McIntosh of HaringeyMy Lords, it is the noble Lord who uses the word "fudge", not me, about the recommendations of the Commission and of the European Monetary Institute. I prefer to think that when, for example, they recognised that the debt ratios of Italy and Finland were above those which were laid down in the Maastricht criteria, they were exercising sensible judgment.
§ Lord Thomson of MonifiethMy Lords, is there not a danger that the Government's indecision over EMU will mean that the European presidency will end on a negative note? Therefore, would it not set the seal on that presidency if the Government felt able, before it ends, to make it clear that they seek to recommend British membership of EMU through a referendum before the next general election?
§ Lord McIntosh of HaringeyMy Lords, the Government are not being indecisive over EMU. Unlike the previous government, this Government have stated that they are in favour of membership of EMU in principle. Indeed, they have stated that there are no constitutional objections to our joining EMU if the economic circumstances are right, and have set out the terms and timescale over which such a decision might be taken.
§ Lord Stoddart of SwindonMy Lords, is my noble friend aware—
§ The Lord Privy Seal (Lord Richard)My Lords, I am doing the best that I can, but I believe that it is the turn of the other side and then it will be our turn.
§ Lord CockfieldMy Lords, as the exchange rate mechanism referred to in the Maastricht Treaty will disappear like a puff of smoke on 1st January 1999, what possible relevance can it have to the question of whether we adopt the euro?
§ Lord McIntosh of HaringeyMy Lords, I am grateful to the noble Lord for his reminder of the difference between what one might call ERM1, which was set up under Maastricht, and ERM2, which, as he rightly says, takes over on 1st January of next year. In place of either of those formulations, I should prefer to rely upon the evidence of the Bank of England, quoted in the report of the European Monetary Institute, which states that what we are looking for is a period of de facto sustained exchange rate stability. That is what lies behind the exchange rate mechanism formulae.
§ Lord Stoddart of SwindonMy Lords, is my noble friend aware—
§ Lord RichardMy Lords, I am sorry that there has been difficulty between noble Lords. However, as a result, the time allotted for Questions has now run out.