HL Deb 18 February 1998 vol 586 cc225-8

2.52 p.m.

Lord Barnett

asked Her Majesty's Government:

What plans they have for joining EMU.

Lord McIntosh of Haringey

My Lords, the Government plan to join EMU only when the economic benefits are clear and unambiguous. Barring some fundamental and unforeseen change in economic circumstances, there is no realistic prospect of Britain having demonstrated during this Parliament convergence with the other European economies which is sustainable and settled. We need a period of stability first. But in order to give ourselves the genuine choice of joining early in the next Parliament, Government and business are now preparing intensively.

Lord Barnett

My Lords, I thank my noble friend for that Answer—at least I think I thank him. Can he clarify the point he made about unforeseen circumstances? It for example, the Chancellor's five tests are met, which seems extremely likely, and it clearly would be in the national interest to join in this Parliament, can I take it that that is not ruled out?

Lord McIntosh of Haringey

My Lords, we shall be delighted if we fulfil the Government's five economic tests. But, as I made clear in my first Answer, our concern is not only for spot compliance but also for sustained and settled convergence, and it is that which we think will take more time.

Lord Marsh

My Lords, can the Minister help the noble Lord, Lord Barnett, and answer his Question by saying whether the Government would consider joining during this Parliament?

Lord McIntosh of Haringey

My Lords, I repeat that I had already answered the Question in my first Answer. The answer is that, barring some fundamental and unforeseen change in economic circumstances, there is no realistic prospect of that. That is the answer to the noble Lord, Lord Barnett, and to the noble Lord, Lord Marsh.

Lord Lawson of Blaby

My Lords, assuming for a moment—although it is unlikely—that there is any proposition in economics that is clear and unambiguous, I should like to ask this question. Does the Minister agree that we shall not have sufficient evidence until the countries which are likely to participate on 1st January 1999 have experienced how the single currency can weather a recession?

Lord McIntosh of Haringey

My Lords, I agree that the additional qualification for our taking forward the EMU project in this country and seeking the approval of the people for entry to EMU is that the single currency itself should succeed. There will be many tests of that currency in the next few years; I hope that they will not include recession.

Lord Bruce of Donington

My Lords, will the noble Lord give the House an assurance that, in seeking the advice which they will undoubtedly have to seek when the new circumstances arise, the Government will remember what happened when, in October 1990, the Government received unanimous and very authoritative advice as to how it was indispensable to join the exchange rate mechanism, with results that are obvious to all of us? May we take it that the Government will have more regard to the facts of the situation, if they can understand them, than to advice?

Lord McIntosh of Haringey

My Lords, I am not sure that I appreciate my noble friend's comment about understanding the facts of the situation. It is an established constitutional principle that advice given to a previous administration is not available to current Ministers.

Lord Newby

My Lords, given that the decision on the first head of the European Central Bank is due to be taken during the British presidency, can the Minister tell us what steps are being taken to ensure that that difficult and contentious decision will be taken on time, and whether the UK will be promoting any particular candidate?

Lord McIntosh of Haringey

My Lords, I can assure the noble Lord that the process leading up to the appointment is on time and there is no reason to suppose that there will be any delay. As the noble Lord correctly says, we have a say in the final decision. We shall exercise that responsibility in a serious way.

Lord Grenfell

My Lords, is my noble friend aware that Chancellor Kohl, whom we welcome to London today, has invited the Bundesbank to prepare a report on progress toward convergence of the EU member-states in anticipation of EMU, which will be discussed in the German Cabinet on 27th March along with similar reports from the European Monetary Institute and the Commission? Can my noble friend say whether, in view of the fact that we shall be chairing the critical meeting in May at which the decision on the initial participants in EMU will be taken, the Government will invite the Bank of England to present a similar report?

Lord McIntosh of Haringey

My Lords, it is open to any government in any member state to consult whom they wish. There is no bar to Chancellor Kohl consulting the Bundesbank on this matter. No doubt in many other member-states there will be discussions between central banks and governments. As my noble friend reminds the House, the final decision will be taken on the advice given by the Commission and the European Monetary Institute.

Lord Boardman

My Lords, can the noble Lord say whether the planning being undertaken will include the preparation of changes to our taxation system in order to fit with the taxation levied by members of EMU?

Lord McIntosh of Haringey

No, my Lords, fiscal independence is not a factor in this matter.

Lord Stoddart of Swindon

My Lords, has my noble friend taken note of the fact that doubts with regard to economic monetary union are creeping up in Germany, that 153 senior economists have cast doubt on the project and that the matter is to be discussed before the German constitutional court? Does he believe that that might have some effect on the progress of EMU? Can he say whether the British Government will take into account constitutional issues as well as economic issues before they decide whether we should join the third stage of EMU and the single currency?

Lord McIntosh of Haringey

My Lords, who am I to contradict 153 economists on the rare occasion when they all agree with each other? No, the Government have determined that, so far as this country is concerned, this is an economic issue, not a constitutional one.

Lord Mackay of Ardbrecknish

My Lords, perhaps I may point out to the Minister that he would be in good company in dismissing the 153 economists. I believe that my noble friend Lady Thatcher did something similar in the early 1980s when 150-odd economists in this country criticised her policy.

Does the Minister hold to the view which we held that membership of the exchange rate mechanism will not be necessary prior to joining EMU? If that is not necessary, does he think that currency stability for two years will be necessary? Does he believe that that currency stability should be at the current level of the pound, which, according to Dr. Tony Scanlon, the outgoing president of the Engineering Employers' Federation in the West Midlands, is doing considerable damage to British manufacturing industry?

Lord McIntosh of Haringey

My Lords, it is certainly true that ERM 1 moved on to the prospect of ERM 2, which is slightly more voluntary than the previous expression. I remind the noble Lord that Article 109j provides for the possibility of normal fluctuation margins on the European exchange rate mechanism but that Article 109m refers to exchange rates being a matter of common interest. I am sure that that will continue to be the case rather than existing exchange rates being fixed for all time.

Lord St. John of Bletso

My Lords, given the inevitability of the introduction of the euro, what are the Government doing to promote businesses in Britain to prepare themselves for the single currency?

Lord McIntosh of Haringey

My Lords, my noble friend Lord Simon of Highbury is responsible within Government for these matters. He appointed a business advisory group in September 1997 which reported to the President of the Board of Trade in December 1997. It is intended that that report will be published. The EMU preparation standing committee, which includes the Chancellor of the Exchequer, the President of the Board of Trade, the Governor of the Bank of England, the CBI and the TUC, had its first meeting late in January. There is a comparable body ensuring that good preparations take place in Government itself.