EMU

HL Deb 19 April 1999 vol 599 cc978-1012

5.40 p.m.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury)

rose to move, That this House takes note of the Government's outline proposals for a national changeover plan for EMU.

The noble Lord said: My Lords, I am delighted to be able to respond to the request by the noble Lord, Lord Strathclyde, for a debate on the national changeover plan. I welcome this opportunity to explain the thorough preparations that we are making to give the UK a real option of joining a successful single currency. I thank all those individuals and organisations who have been involved in taking this project to the stage where we could publish the plan. It has been a major consultation process, with a wide range of representative groups of business interests.

I hope your Lordships will support what we have achieved so far and our plans for taking forward preparations. I look forward to hearing your Lordships' views on this important issue.

I hope to cover three main areas: the Government's policy on membership of EMU; the preparations made to deal with the arrival of the euro from January of this year—what we have done to make sure that the UK is ready for the euro, whether in or out of EMU—and, finally, the work being done in both the public and private sectors to give the UK a real option of joining.

The question of British participation in the single currency is certainly one of the most important issues this country is likely to face for a generation. So, on coming to office, the Government made a number of important decisions. First, we announced our commitment in principle to economic and monetary union and our decision to make clear and unambiguous economic benefit to this country the decisive test for UK membership. Secondly, we spelled out our firm intention to take the lead in a period of preparation in order to ensure a genuine option to decide to join a successful single currency early in the next Parliament. Thirdly, because of the magnitude of the issue, we said that the final decision on joining should be taken by the British people at a time when it is possible to judge more accurately that the economic benefits are clear.

I have said that the essential decision is economic. The Government's central economic objective is to achieve high and stable levels of growth and employment. Britain's interests in the single currency need to be judged against this objective and to do that we have set out our five economic tests. We stand by the tests as the basis for a rounded and pragmatic assessment of the economic case for membership.

Our tests are challenging and we are making progress towards meeting them. Monetary and fiscal policy have been put on a stable, long-term footing which, we are convinced, will help to put an end to the particular instabilities and volatilities which have plagued the UK economy in the past. Greater economic stability will minimise differences between our economic cycle and that of the eurozone. We have also taken numerous steps to improve the degree of flexibility in our economy through new deals for the young and long-term unemployed and reforms to the tax and benefit system. However, we cannot say that our economic tests are met yet. We need to be able to judge that that convergence is capable of being sustained.

Ensuring this country has a real option of deciding to join a successful euro is the best way of promoting our national interest. The Government are committed to delivering a genuine choice to the British people. That means we need to start making preparations now. It is only through a period of intensive preparation that government, Parliament and the British people will be in a position to make an informed decision about where our economic interests lie.

Our policy on entry is, therefore, clear. It is important that we should prepare for the reality of the euro whether the UK is in or out. In autumn 1997, the Chancellor of the Exchequer set up, under my leadership, the Business Advisory Group with representatives from nearly 20 key business and trade organisations, the Trades Union Congress and the Consumers' Association. The Business Advisory Group's remit was to consider the practical implications of EMU.

In January 1998, the Business Advisory Group reported on a range of preparations, issues arid arrangements for possible UK entry. Throughout 1998, the Treasury's Euro Preparations Unit was the focus for taking forward the Business Advisory Group's recommendations and stimulating preparations in both the public and private sectors.

Here are just some of the steps that the Government have taken to help business prepare. The Government have produced a range of publications on economic and monetary union and core information for business, especially small and medium-sized enterprises (SMEs), in the form of 20 clear, concise factsheets on "business preparations for the euro". Over 375,000 sets of fact sheets have now been requested by industries and companies.

We have set up a euro preparations website and opened a 24-hour telephone line for ordering the factsheets and carried out a high level national communications campaign aimed at business including TV advertising and direct mailing. The Government have provided speakers for numerous euro preparations events and trained over 500 staff of business intermediary organisations across the UK.

The Government have published six-monthly progress reports on overall and sectoral preparations. The Government have also been responsive in their approach. The public sector is ready to facilitate business use of the euro. Firms can now pay taxes, file accounts, issue and redenominate shares, receive certain agricultural grants and grants under regional selective assistance (RSA) in euros. Customs and Excise has trained 10,000 staff to respond to business needs. All that means that the public sector and business is getting ready for the euro whether the UK is in or out.

Lord Lamont of Lerwick

My Lords, perhaps the noble Lord, Lord Simon of Highbury, could enlighten me on one point. Will taxes paid in euros be calculated at the point of assessment or at the point of payment? If there is an exchange rate loss, will that be borne by the Treasury or by the taxpayer? If it is not borne by the Treasury, is not the whole idea of paying taxes in euros simply a gimmick?

Lord Simon of Highbury

My Lords, I do not think it is a gimmick because there is a choice. The exchange risk will be borne by the taxpayer.

The UK must be in a position to make a quick and smooth transition should Parliament and the people decide to join the single currency. What the Prime Minister announced on 23rd February was not a change of policy but a change of gear. The sheer nature, scale and complexity of the arrangements require considerable time for such preparation. If we do not start to face this reality now, we shall simply not have the practical means necessary to make a choice.

The Government have been working with a great many organisations such as the banks, Chambers of Commerce, Business Links, CBI, and others, on preparations that would be needed for UK entry if that is what Parliament and the people decide. This has been a consultative approach. The changeover plan is very much a consultative document. It seeks to stimulate debate and help people think seriously about what might be involved if we decide to join the euro and it sets out a possible timetable for adopting the euro if the country decides that that is what it wants to do.

Once the Government have announced their decision to recommend joining a single currency to the people, we could hold a referendum of the people within four months. Following a positive referendum result, we would be in a position to introduce euro notes and coins 24 to 30 months later. And six months after that we could see the withdrawal of sterling. So, in total, we estimate it could take three years from a yes vote by the people to the withdrawal of notes and coins.

This is only a provisional timetable and we must do a great deal more work with business and the wider public sector before producing a further plan next year. As I said earlier, this is a consultative process and so we are keen to hear what British business thinks. We can also learn more from the experience of the 11 countries who joined in the first wave and adopt their best practice. There is a wealth of IT experience of euro conversion and real experience of the growth of euro use during the period of changeover which is already developing in continental Europe.

It is essential that as part of this process the public sector shows a lead, making clear the Government's commitment to prepare. Each department now has a Minister responsible for euro preparations and each will now report regularly on preparations they are making. Where computer systems are being upgraded, all departments will build in euro compatibility where that represents value for money. In the case of the Department of Social Security, the Inland Revenue and Customs and Excise, the scale and complexity of their computer systems makes advance preparations critical. Together those departments are the main interface between central Government and the business community, and deal with almost every individual in the UK. They will need to spend some money prior to a referendum to make their information technology systems euro-compatible so that we can maintain the flexibility for Britain to make the changeover as quickly and cost-effectively as possible in the event of a positive referendum result. We are taking the necessary steps in the public sector.

The Outline National Changeover Plan looked at the key sectors across the whole economy to produce the practical steps that would need to be taken if the UK was to join the single currency. One among those key sectors is retail banking which provides essential services for the rest of the economy. Both through the British Bankers' Association and through direct representation, the banks have been working closely with government in developing an understanding of changeover issues. Many are already offering euro services but they need to think about how demand for those services will build up over time and how they will meet that demand. They need to decide how they will make the process of conversion as simple for their customers as possible.

Retail banks have specialised computer systems which would require thorough planning and significant investment to adapt. This is a complex area. It involves looking at different technical approaches and seeing what lessons we might be able to learn from banks participating in the first wave. The changeover plan states the issue. We now need to continue our work on it.

The retailers are another key sector who would be in the front line in any changeover to the euro; again, we consulted closely with representatives of the sector such as the British Retail Consortium, and all that has gone on behind the development of the national changeover plan. We will continue to do so as planning progresses. Many of the eurozone countries are still developing their approaches in areas such as consumer information and dual pricing, so lessons will only emerge over time and particularly with the introduction of the first euro notes and coins.

Maintaining the confidence of consumers during a changeover would be vital for all retailers; and those that managed to do so most effectively would obviously be at an advantage over their competitors. It is an issue that the retail sector as a whole is keen to address through the development of a draft code of practice, covering such matters as consumer information and dual pricing. The Government welcome that initiative.

Preparations work is not confined to the public sector, the banks and the retailers. The plan also looks at the wholesale financial markets so successfully launched in the first stage on 1st January this year by the City of London with, of course, expert guidance from the Bank of England. We are also studying the production of notes and coins and, separately, the legislative issues which still remain. We will continue to work to refine our understanding of all the issues involved and continue to make practical preparations. My message for noble Lords is that we are making significant progress in preparing the UK for the possibility of joining. The country will have a real choice.

It is government policy that, in principle, Britain should join a successful single currency. That principle is real. The practical preparations that we have set out are also real. The conditions necessary so that we proceed with caution, common sense and in our own interests, are real. If it be the nation's wish that we join, we have an outline programme to facilitate entry into the euro system which will enhance Britain's future in Europe and which has this nation's economic interest at its heart. I beg to move.

Moved, That this House takes note of the Government's outline proposals for a national changeover plan for EMU.—(Lord Simon of Highbury.)

5.56 p.m.

Lord Skidelsky

My Lords, the Outline National Changeover Plan published on 23rd February this year sets out what it calls a "critical path" from the decision of the Government to join the euro to the end of the changeover period when sterling would cease to exist—a period expected to last three years and four months. It then outlines what the various economic sectors should start doing now to adapt their systems to membership. There is a lot of material about preparing computers, information technology, cash machines, pricing systems and so forth for what the Minister called "euro-compatibility"; the general idea being that the economy should be geared up to a state of readiness to join the eurozone quickly if and when the Government and people decide to join.

Much of what is contained in the national changeover plan is perfectly sensible. We criticise it not for what it puts in, but for the intellectual and political vacuum which surrounds it. The preparations assume that it is in Britain's urgent interest to join the euro; that the economic conditions for our membership laid down by the Chancellor in October 1997 will be met sooner rather than later and, in short, that life outside Euroland is simply unthinkable. Yet astonishingly the Government have never set out the case for any of those propositions. It is as though they were urging us to prepare for a war without explaining why we need to fight that particular war.

I should like to draw attention to what was surely an extraordinary statement by the noble Lord, Lord McIntosh, in your Lordships' House on Wednesday 14th April. My noble friend Lord Peyton of Yeovil had asked, Whether [the Government] will issue a White Paper setting out the political and economic reasons for and against the United Kingdom joining the European single currency". In his reply to a further question from my noble friend Lord Bridgeman, the noble Lord, Lord McIntosh, said, A White Paper of the kind asked for … is appropriate only when a decision … is imminent".—[Official Report, 14/4/99; col. 769.] Do not the Government believe that they have a duty to put all the facts, all the pros and cons, to the public before they exhort or require businesses to make costly preparations for the changeover? The national changeover plan is not simply an outline of what the Government expect businesses to do; it is a set of propositions which will be extremely costly to implement. Businesses are being asked to spend tens, possibly hundreds, of millions of pounds preparing for an event which may never happen, without even being told why it should happen and certainly why it should happen so quickly.

The Government have argued—the Minister has made this point again today—that the case for joining EMU is fully set out in the Treasury paper, UK Membership of the Single Currency, issued in October 1997. It stated five economic tests which had to be met before Britain could expect to prosper in the single currency zone: Sustainable and durable convergence is the touchstone and without it we cannot reap the benefits of a successful EMU". That has been the only official government pronouncement on this matter, but it does not add up to an argument for joining.

The Treasury itself is too cautious, rightly so, to say whether or when convergence will be achieved. Even if we leave that aside, to say that under certain economic conditions we can prosper inside the eurozone is not an argument for going in, unless it can be plausibly shown that we would be economically worse off if we stayed out or that joining would confer additional political advantages which could not be matched by equivalent gains elsewhere. But the Government have not actually made these arguments.

Our contention, therefore, is that we should have this discussion, this wider debate, before we make any further preparations for joining. The time to Kart the changeover is when the British people have decided that they want to join the single currency. To start it now, before the debate has taken place, before the decision has been reached, on the ground that unless we prepare now we shall not have a real option to join early in the next Parliament, seems to me to be simply an attempt to bounce us into accepting that our joining is inevitable. Do the Government really believe that three and a half years would be insufficient to prepare for a changeover once the decision has been taken?

Perhaps I may take up one or two particular points. In his October 1997 statement, the Chancellor said that there is, no constitutional bar to British membership of EMU". Ministers flourish that statement as though it were a great discovery. Of course, there is no constitutional bar to our membership, because Parliament is sovereign and it can do what it likes.

But joining has quite profound constitutional and political implications. At each step in our deepening involvement with the European Union, there have been political and constitutional implications which have been deliberately hidden from the British public by successive governments' insistence that the EU is purely an economic arrangement.

The Prime Minister reinforced this in a recent statement. He said: just as the euro cannot be conceived of except politically, it cannot be made to work except economically".—[Official Report, Commons, 23/2/99; col. 181.] I will try to translate, because its meaning is not obviously apparent. To say that the euro is "conceived of politically" surely means that it has political consequences. If we join the euro, Parliament loses control over monetary policy; but do the Government really believe that the European Central Bank will be allowed to remain a kind of Vatican City in the middle of Europe, a 21st century version of the Papacy, answerable only to the god of monetary theory? Is it not much more likely that a successful attempt will be made sooner or later to impose ultimate political control over the European Central Bank at the European level? And does that not mean a European government or a move towards it? That is not just a hypothesis. It is the avowed aim of most leading continental politicians when they talk on this matter.

Politicians in this country need to be as honest as those on the Continent about the political implications of UK entry into a single currency. If the Government said, "We do not believe that monetary union will lead to political union" or, alternatively, "We believe that political union is such a valuable prize that we are willing to take economic risks to get it", we could at least have a proper debate on the matter. But to pretend that there is no connection between political union and monetary union, that the issue of our membership should be decided solely by economic criteria, is intellectually feeble-minded and politically dishonest.

The changeover plan talks a lot about how businesses and departments should prepare for life in Euroland, but says nothing about how the economy as a whole should be prepared for membership of a single currency. The Government refuse to tell us whether they think that the British economy is becoming more or less like that of continental Europe and they do not tell us how our economy can be made to converge, if it is not doing so of its own accord.

Perhaps I may give one example. Article 3 of the protocol on convergence criteria in the Maastricht Treaty states that a member state should have, respected the normal fluctuations provided for in the Exchange Rate Mechanism … without severe tensions for at least two years", before being allowed to lock its currency "irrevocably"— a word I never like—into the euro. At the time, the normal fluctuation was 2½ per cent on either side of a central parity. Under present conditions, with all that has happened since 1992, the Government should be preparing, if they want us to enter the euro early, for sterling to shadow the euro as part of their preparations for joining. Yet the Government deny that they have any intention of sterling shadowing the euro and imply that convergence of domestic prices leads automatically to convergence of exchange rates. Do they really believe that? If they do not, how do they square alaissez-faire attitude to the value of sterling with their critical path to joining the euro from early in the next Parliament? I do not find any satisfactory explanation of what seems to me to be a clear inconsistency.

There are many other indicators of divergence between Britain and the Continent which I could go into: the fact that we are the European Union's only oil exporter; that we have far more mortgage debt than the rest of the EU; that UK households hold a higher proportion of their wealth in equities; that we have no pensions "time bomb"; that our labour markets are more flexible, and so on. I would single out just one divergence. I refer to that between our trading patterns and those of our EU partners.

According to Business for Sterling, British industry and commerce do more business in dollars than in all the European currencies combined. We export 19 per cent. of our GDP to the eurozone and 25 per cent of our GDP elsewhere. We do more trade outside the EU than any other EU member, and invest more outside the EU and attract more investment from outside the EU than any other member. That means that any savings for firms as a result of our membership of the single currency would be deployed over only 19 per cent of the national economy. There would also be greater exchange rate instability for the rest of our foreign trade, unless the euro-dollar exchange rate were fixed.

The national changeover plan is costly and premature. Unless we are given a much greater insight than we now have into the Government's reasons for wanting to join EMU, we cannot have a proper debate; and unless we have a proper debate on the merits of the project—and I stress, on the political merits just as much as the economic merits—we shall be in danger of drifting into irrevocable commitments which we may well live to regret.

We are asked to take note of the national changeover plan. We, on these Benches, do so with regret.

6.10 p.m.

Lord Williamson of Horton

My Lords, the subject of our debate this evening is theOutline National Changeover Plan, which is a fairly substantial document of 64 pages targeted at different sectors and, rather appropriately, printed in red, white and blue for the most part. I should like to make a number of specific comments about the changeover plan during the course of my intervention.

In order to set this in context, which I believe a number of other noble Lords will wish to do and because all questions relating to economic and monetary union and the single currency risk becoming contentious in this country, I should like to make two preliminary comments based on my own experience. I attended all the meetings of the heads of state and government which discussed economic and monetary union and the related issues over a 10-year period from 1987 to 1997. Although some of it was rather boring, I have not forgotten all of it.

I should like, first, to recall that we have had quite a lot of time to think about EMU and the single currency. It is not a new issue; it has been with us quite a long time. Of course, it stems directly from the Maastricht Treaty. Indeed, on reflection, we might say that many of the provisions in that treaty are not very important at all. But three elements of it were extremely important: economic and monetary union, the single currency and the United Kingdom opt-out; the increase in the legislative role of the European Parliament, because there were important changes which increased its powers; and the attempt to create a sort of intergovernmental common foreign and security policy.

At that time, and subsequently, I was very much impressed by two great misunderstandings, going in opposite directions, which applied to the Maastricht Treaty and the subsequent discussion. I believe that those misunderstandings still leave their traces in the discussion on economic and monetary union today and in this debate. On the one hand, the governments of the member states did not generally understand the doubts of the public in a number of member states about the content of the Maastricht Treaty; indeed, the central element of that treaty was economic and monetary union. When the treaty was agreed—I was there myself—the Ministers were as happy as sandboys and did not foresee the difficulties which would arise in some member states. That was one of the problems.

However, on the other hand, the public and the media, particularly in the United Kingdom, did not fully understand the force of the powerful political and economic impulse which drove the heads of state and government of most member states of the European Union to launch economic and monetary union and to participate in the single currency. The conclusions, in my view, are still relevant today: do not underrate the doubts of the British public today, and do not believe that, in some way or other, the euro is going to fail.

For too long many who commented here on economic and monetary union and the move to a single currency thought that it was not going to happen, that few countries would meet the criteria or that, because it was not an optimum currency area, there would be difficulties which would generate economic shocks. Of course, there was an element of truth in the last point because both the press and economic commentators do often get things partially right, but the situation today is different and very clear. The move to economic and monetary union by 11 member states with the locking of their currencies has been smoothly made, and the preparation for the introduction of the euro notes and coins is going forward according to the timetable.

We can conclude that for the foreseeable future, whether or not the UK decides to participate in the single currency, our businesses and our citizens travelling on the Continent will be dealing with the euro. On balance, the existence of the euro in the 11 countries will be positive for British businesses and British travellers, not only because it reduces the complications of the currencies but also because it will make pricing more transparent and thus improve the operation of the single market.

Secondly, we are in a special position not just because of the opt-out but because any decision to participate in the single currency will be taken by the British people in a referendum. Although there will not be any immediate decision by the British Government and people on the question, in my view it is right that, like the Boy Scouts, we should be prepared. This means that, in the event of a negative decision, we must be able to maximise our capacity to benefit from the existence of the single currency elsewhere and to protect and promote the interest in particular of our position in financial services. In the event of a positive decision, it means that the complicated and difficult changes, to which the Outline National Changeover Plan refers, should be prepared and completed as quickly as practicable in order to minimise the disruption and uncertainties on the practical changes necessary.

I therefore support the decision of the Government to present an outline plan and, in particular, their invitation for comments and informed debate on the many practical issues raised in the plan. I am sure that the Minister will be glad that I have now arrived at Westminster from Maastricht and that I am supporting the Government's position on that point. I know that there are different views, but I think that it would be insulting to the British people if, after they had been invited to make a decision in a referendum in the next Parliament and if they decided to join a single currency, we were then to say that no preparations had been made and that much time would be needed. The Government are right to point out that the Outline National Changeover Plan states that, without preparation, it is not a practical option". On the substance of the Outline National Changeover Plan, I also have two points to make. First, it is certainly helpful to have the various case studies and an estimate of the timetable for the changeover, which, as the noble Lord, Lord Skidelsky, pointed out, the plan estimates 40 months or less from a government decision to join to the sole use of the euro. However, if we look in particular at the timing for the adaptation of complex IT and other systems—especially in retail banking where most of those systems which were installed a long time ago have been adapted over the years but are not necessarily capable of continuous adaptation—we can say that this is a rather ambitious timetable both for business and for the public sector. It is unusual for a government to be ambitious, but not forbidden. But I believe that this time it is in fact rather ambitious.

Secondly, the plan asks quite specifically whether there is a role for regulation—by which is meant legislative action—of the practical steps of any changeover. I very much hope that the Government will stay with their support for a voluntary approach and the development of a UK code of practice to help consumers, retailers and suppliers. The first priority should be the consumers. But, to ensure the best deal for them, we need adequate information, very adequate information and perhaps very very adequate information. We also need a certain flexibility within the framework of a code of practice.

To sum up, the people will decide but it is right to prepare information and to examine the practical problems now, using a voluntary approach as far as possible. The Government are also right to invite comments on the outline plan and to be ready to present a further public changeover plan after that consultation.

6.18 p.m.

Lord Barnett

My Lords, I agree with much that the noble Lord, Lord Williamson, has just said. I should like to deal with the three basic attitudes which exist in relation to both the plan and. indeed, economic and monetary union, although there are many strong variations on those basic attitudes. First, there are those who oppose the latter with different intensity. I include the noble Lord, Lord Skidelsy, among them and, indeed, the Official Opposition. In fact, judging from what they say, if they were honest they would admit that they would be opposed not just to EMU but probably even to membership of the European Union. They certainly do not leave many options open.

Secondly, I agree with the Government's White Paper for reasons that were well spelt out by the previous speaker. However, I take a different view, a third view, which I should like to outline.

I begin with those who oppose the changeover plan—the noble Lord, Lord Skidelsky, and the Official Opposition—although that attitude is not held by every Member of the Official Opposition, as we all know. However, the argument was put by the Leader of the Opposition in the other place when the Statement was made on 23rd February. He said that there were fundamental risks. Of course, there are risks. No one would doubt that; certainly not myself. However, I assume that "fundamental risks" means something fundamental.

Indeed, on 23rd February the right honourable gentleman the Leader of the Opposition asked whether there was not an attempt to lull people into thinking that, a nation that has decided its own destiny for 1,000 years is no longer fit to do so".—[Official Report, Commons, 23/2/99; col. 186.] The Prime Minister challenged Mr. Hague on that occasion. He said, also at col. 186, At least the right hon. Gentleman has made it clear that he is opposed to a single currency for good, for ever". Mr. Hague replied, No, I have not". I quote Mr. Hague directly, which I assume will upset some noble Lords opposite. I see that one of them is laughing now. Certainly that does not appear to upset the noble Lord, Lord Skidelsky. I believe he would strongly agree with those sentiments. However, he said that he does not like the word "irrevocable". What the noble Lord, Lord Skidelsky, has said, and what the Leader of the Opposition said in another place in this context, means "never". I do not think there can be any doubt about that in anyone's mind. On the other hand, one is bound to say that even if it is in the national interest to join in the next Parliament, the noble Lord, Lord Skidelsky, his colleagues and the Leader of the Opposition in another place would not go along with that; they are opposed to it. As I say, those are the people who oppose the changeover plan and economic and monetary union.

I shall now discuss the plan itself. For the same reasons that were given by the noble Lord, Lord Williamson, I strongly agree with the need to make plans and to prepare for the possibility, as the Government put it, of joining. The document emphasises areas of vital national interest. I refer to the timetable which my noble friend Lord Simon mentioned, and which is referred to in some detail in the document, which states that the process would take about four months from the taking of the decision to finishing the referendum, and then up to four years for larger public sector departments, but overall it would be something like 40 months. That means that even if a decision was taken on this matter after a general election—which one assumes, in the light of all that is happening to the Opposition, the Government would win—we are talking about the end of the year 2001. The process would then take up to 40 months, if not a little longer.

Therefore, we would not assume membership of economic and monetary union and a single currency until 2004 or 2005. My personal view is that is far too long for us to be outside such an important currency area. I disagree with the Government on that point. However, that does not mean that I disagree with the need to plan and to prepare for our joining. Indeed, the Government have expressed the view that in principle they are in favour of joining, although they could not help including in the document and in the Prime Minister's Statement the words "conditional", "not inevitable", and "a change of gear". If that is the position, the noble Lord, Lord Skidelsky, is probably right that we should not have issued the document at all. I hope that our joining is not conditional; that it is inevitable that we shall join; and that it is not just a matter of a change of gear.

Although I recognise the political reality that all governments, and particularly this one—if I may put it that way—do not like to commit themselves too strongly until they have certain newspapers, or even the British public, on their side (leaving aside the noble Lord, Lord Lamont), I find it incomprehensible that they are unwilling to say that it is now a matter of "when" we shall join rather than "if. When we debated this matter previously, my noble friend Lord Simon did his best when he said that the matter means effectively what is in the eye of the beholder. He did not exactly use those words, but that is what he meant. I see that he nods his head. When he replies to this debate, I hope that he will do a little better than that because this should not just be a matter of what is in the eye of the beholder. If we agree to the measure in principle, we should say so as that would be beneficial to the whole future of Britain inside Europe.

The third of the basic attitudes that I have mentioned—I include myself in this—is that the UK is now more convergent, and sustainably so, than many of the 11 which are already in the system. The Government still continue to insist that we must meet the five economic tests that the Chancellor spelt out in October 1997. They should not talk about that because we all know that the five economic tests were not terribly relevant then and are much less so today. I recognise the problems that my noble friend Lord Simon faces in agreeing with me, but I hope that he will agree with me on this—to some extent at least. We refer to the economic cycle here as being different, but my noble friend must know that there will always be differences in economic cycles within 15 countries. If we were to insist on that point, then, like the Opposition, we really would mean that we would never join. There will always be some differences in the economic cycles. As regards interest rates, although clearly there is a difference between our interest rate, those in other European Union countries and that of the 11 member states which have joined, the margin is much narrower now. If we were to announce today that we would now join as a matter of fact, I believe we would close that margin considerably and without too much difficulty. That would considerably help the British economy.

It is constantly said that one of the five economic tests is the need for sustained economic strength, as the Prime Minister said in the Statement of 23rd February. I hope that the Prime Minister believes what the Chancellor has been saying. Although I have had my doubts from time to time, I believe what the Chancellor said. I believe that most people in the country have now stopped talking about recession, crises and all the rest of it. What the Chancellor has said both in his Budget and in other statements about the economic strength of the United Kingdom signifies that we have more sustained economic strength than many of the 11 which have already joined.

I believe that the Government's position is absolutely right as regards the plan. It is sensible to prepare, whatever may be said by the Opposition. But it must be wrong not to give a clear lead today. Let us forget the five so-called "tests". Matters are never likely to be better than they are now, or in the next year or so when I hope we shall join. I hope that the Government will declare their intention to proceed rapidly with the changeover plan so that we can become a real leader in the European Union—and much sooner than now appears to be the case.

6.28 p.m.

Lord Cockfield

My Lords, it is always a great pleasure to follow the noble Lord, Lord Barnett, not least because, although we sit on different sides of the House, on major issues confronting the European Union we stand on very much the same side.

Although this will be well known to most of your Lordships, I support, and always have supported, the concept of a single currency. Indeed, I regard it as the crowning achievement of the single market. It is in fact the keystone which holds a whole edifice together and complete. My only regret is that we did not join at the outset. In the case of the Major government, riven as they were by dissent, that is understandable. But the Labour Government have no such excuse. Having said that, I now propose sticking strictly to the subject matter of the debate, which is the outline changeover plan that has just been published by the Government.

It is a step forward that the Government should have published such a plan, but nevertheless it is deeply unsatisfactory. It sets out various steps in the changeover. There is nothing novel about that. Indeed, virtually all of this information appeared in the Financial Times a couple of days before we last debated this subject on 20th January. The changeover plan adds very little to that. While it is good as far as it goes, it contains neither a starting date nor a date of conclusion. It is as though you invited somebody to take a journey by train and you told them it would take four hours, but you were not prepared to disclose when the train would leave, still less when it was expected to arrive. You did, however, warn the traveller that he might meet delays en route and you even said the train might arrive early. That, of course, is very reminiscent of the way the railways are run at present—except for the possibility of arriving early—but for the Government, that is not good enough.

Having said that, I wish to draw specific attention to two perils which might he encountered on the mystery tour to which the Government are now inviting us and which might have an important bearing on the time the train arrives at its destination. I tried to explain the first of the perils in some detail in the debate on 20th January, but I failed to put over my point. I propose having another go now. I am sorry that the noble Lord, Lord McIntosh of Haringey, has left us because he replied to the debate on 20th January and I would not like him to think that I was in any way dissatisfied with the reply that he gave. It is simply that it was not an answer to my question. I am hoping for rather better luck with the noble Lord, Lord Simon of Highbury.

From the political point of view, what really matters about the changeover is the retail stage. That is when euro notes and coins will be substituted for our existing currency. That is when the general public—the man in the street, the shopper—will come face to face with the reality of the changeover. Anyone whose memory goes back to 1972—and the memory of some noble Lords will do so—when decimalisation was introduced will recall the public outcry that occurred on that occasion. They will recall that people claimed they (lid not understand and that there was profiteering on the part of retailers and other people. The reaction to the introduction of the euro at the retail stage is likely to be far worse than anything that occurred in 1972.

By an irony of fate, the retail stage under the timetable for the introduction of the euro, which has now just started to run, coincides with the date when the next general election might be held. That is likely to be in 2002. In our debate on 20th January I asked the Government how they proposed to deal with that singularly unfortunate coincidence of two major events. As I said, I received no reply, so I am now trying once again. To some extent, the answer is given in the changeover plan. I shall give two quotations, but I have left out what I regard as unnecessary words. The changeover plan states that, making a decision, during this Parliament, to join is not realistic". The second quotation follows almost immediately afterwards: a decision to join … can be made early in the next Parliament". Leaving aside the question that "can" can always be interpreted as "might" if it is expedient so to do, it would seem at first sight to meet my concern as it places the whole operation beyond the next general election which, incidentally, need not take place until May 2002. But it raises all kinds of other problems. In particular, it could create real problems in relation to the following general election, especially if the election in 2002 were late and there was then pressure to wait until the reaction on the Continent to the retail stage was known. That might well take many months to assess. That might have repercussions in relation to the timing of the following general election.

I realise that all this can be dismissed as idle speculation, but unless the Government have a very clear idea of how they will address these problems, industry and the private sector generally will be left in a state of uncertainty. Fortunately, there is an answer—I offer the Government this advice—in terms of having an early general election this time round. Instead of letting the present Parliament run its full term until May 2002, a general election could be called a year early; namely, in May 2001. There is nothing unusual in a four-year Parliament instead of a five-year Parliament. Indeed, a five-year Parliament carries certain risks for the incumbent government, as the noble Lord, Lord Callaghan of Cardiff, and my right honourable friend John Major, will testify, both of whom thought that they would run to a five-year Parliament.

In offering the Government the option of a four-year Parliament I am trying to assist them. The decision to join could then be announced in the Queen's Speech; the changeover programme could begin to roll and would be completed well before the following general election. It would require real courage, but unless the Government are absolutely clear and categoric about this and, therefore, about the timetable as a whole, many people will simply sit on their hands, wasting time arguing the toss, and the end result will be disaster—not just for the Government, which arguably does not matter, but for the country, which certainly does matter.

We have before us now the lesson of the millennium bug. People have not been prepared to take it seriously and we have reached the stage where, if people have failed to take the necessary measures, it is almost too late to do so.

There is a second peril which must at all costs be avoided; namely, going in at what proves to be the wrong rate of exchange. To understand this point we need to return to the disaster that occurred when we joined the ERM. It is commonly said that we went in at the wrong exchange rate. That is not the real explanation. The real reason is that we went in at the wrong time—just at the time when the Lawson boom was reaching its climax and the economy was poised to slip downhill. When a country moves into recession, normally its rate of exchange weakens. That is a benign development because the weakening of the rate of exchange encourages exports, and that in turn can often start the recovery under way.

When we entered the ERM the exchange rate was entirely correct as of that day. But as we moved into recession the exchange rate ought to have fallen, but it could not do so because of the constraints imposed by the ERM. In short, after proclaiming year in, year out that we would enter the ERM when the time was right, we went in exactly when the time was wrong. I hope that that error will not be repeated. I shall deal with the point in greater detail. In the end, we broke out of the bind, which was a self-inflicted injury—no one else was to blame—by leaving the ERM. That drastic remedy is not available in relation to the single currency. It is a case of once in, effectively always in. So once we join, we have to get this one right. Ideally, that means entering the ERM when we are at the bottom of the economic downturn, when our currency is at its weakest and when, it is to be hoped, the other countries are at the top of their economic cycle. That is precisely the opposite of what Mr. Brown has advocated in wanting our economy to be "in sync" with the other economies of the economic union.

It is no good thinking that this problem can be solved by negotiation. The other member states will never for a moment accept a rate of exchange for the pound when we enter which is different from the current rate of exchange. We must ensure that, when we enter the single currency, the facts meet our expectations. There is, of course, a problem with the Maastricht criteria—if anyone really knows what those criteria amount to. I know that my remarks may sound pretty Machiavellian, and I would never accuse the Government of being as clever as that, but the European Union is no gentlemen's club. You have to be pretty ruthless if you are going to survive.

6.43 p.m.

Lord Peston

My Lords, I congratulate my noble friend both on the plan that we are debating and on his presentation of it. I begin from the position that, no matter what the theoretical pros and cons of monetary union per se, now that EMU exists the United Kingdom should be a member. I appreciate the difficulties of a new government, after 18 years in opposition, taking an early decision to join. But, like my noble friend Lord Barnett, I am sorry that the earliest Britain could now be a member would be the third, fourth or even fifth year of the new century.

The present document refers to whether the economic case for the United Kingdom joining is clear and unambiguous. I can only say that I am hesitant about regarding the economic case for anything as capable of being clear and unambiguous. That applies even more so to business decision-making, which is usually about the balance of advantage and disadvantage, or the choice of evils.

With that caveat, I would assert that at this moment the United Kingdom would be more likely to prosper within the single currency system than some of the countries that have already joined. That is also true if the criteria of sustainable convergence are examined. Rather like my noble friend Lord Barnett, I believe that we have converged to the necessary degree and can sustain that position relatively easily. I am therefore much more optimistic about this matter than is my noble friend the Minister.

The noble Lord, Lord Skidelsky, gave the usual list of all the ways in which this country differs from all the other members of the European Union. He did not include the main difference, which I am convinced underlies the opposition of the so-called Eurosceptics. The main difference between us and them is that we are British and they are foreigners. That is the whole point about Euroscepticism. It has nothing to do with a serious analysis of economic matters. Happily, the noble Lord, Lord Skidelsky, did not take that xenophobic view.

The noble Lord led us to the serious question of the exchange rate. The document refers to exchange rate stability against the euro. I do not know whether that replaces the Maastricht Treaty condition, which related to membership of the ERM and exchange stability within it. For several years (I asked this question several times of the previous government) the Treasury appears to have said that the original Maastricht condition no longer applies. It would be useful if the Minister could confirm that.

Much more important is the question raised by the noble Lord, Lord Cockfield, to which I have to say I do not know the answer. Almost everyone agrees that the fixed value of our currency within EMU must be lower that it is at present against the euro. What is not clear is how we arrive at the correct value, assuming that we can work out what it is. The Bank of England's Monetary Policy Committee has a remit to hit an inflation target. The Chancellor has set fiscal policy in the medium term, and therefore has shown what used to be called Keynesian short-term interventionism.

It follows logically from that that the exchange rate is simply determined by market forces. The Government have no control over it at all. That means that at some point either the remit of the Monetary Policy Committee has changed, or something miraculous has happened. I, for one, am not a great believer in miracles. It is, anyway, true that in clue course new legislation must be introduced to replace the 1998 Bank of England Act. The Monetary Policy Committee of the Bank of England will cease to exist and the Bank of England will become just like the central banks of other member countries, sending a representative to the European Central Bank in order to help formulate monetary policy and retaining only a technical role for itself.

Here is as powerful an example as any of what we lose by not being a member now. A new form of policy-making is emerging at the European Central Bank. Member countries openly state that they are learning the ropes and gaining experience as they go along. But by the time we join, a great deal of their operating procedures and monetary policy philosophy will be determined, without our having any ability to influence or change it. In other words, it is a repetition of the story of the European Union in all its forms over all these years. That is a great pity.

Perhaps I may now make a few remarks on the practical details as they are admirably set out in the document. My noble friend and his committee (or committees) are doing an extremely good job in most difficult circumstances. It is a commonplace of economic theory that changing the currency unit has no economic effects. It is equivalent to the proposition that the real temperature is no different whether it is measured in centigrade or Fahrenheit. That said, it is interesting to the average academic economist how difficult and costly changing the unit of account turns out to be.

I also note, somewhat wryly, how IT appears to be as much a part of the problem as the solution. The miracle of computing power available at all levels of business and households would have caused naive people such as me to say that the changeover would be easy. It would be like my route-planning software. At one click I can tell it to calculate distances in miles or kilometres or petrol consumption in gallons or litres. Telling computers to calculate transactions in euros instead of sterling would be just as simple, I would have thought. But I am clearly wrong.

In those circumstances, I have to reflect on the following sentence on page 31 of the document, to which the noble Lord, Lord Williamson, has already referred: By and large the UK clearing banks have core systems which were originally built— believe it or not— in the 1960s or 1970s but which have since been expanded over the years as services have become more sophisticated. The systems are very good at what they do, but are quite difficult to adapt". I can only comment that you do not have to be a genius to see that in the contemporary world adaptability is of the essence. What kind of people, including the retail banking system, are ordering and building systems which are difficult to adapt to changing needs?

My last technical comment concerns business preparation generally. What assumption is business being asked to adopt? The document sets out clearly and forthrightly the problems of planning. But are businesses being urged to plan on the assumption that we will join? If not, when will they be advised to make that assumption? That point was made by other noble Lords. Presumably the public sector is planning on the assumption that we might join. But with what degree of probability? I do not expect my noble friend to answer questions like that now, but they cannot be left unanswered indefinitely.

That leads to my conclusion on information. It seems to me that the public is bewildered by all the single currency business. The reason is that ordinary people are being asked to respond to hypotheticals: what might be or what would be. What they need are actuals. My own view is that we require a public information campaign, but we require it now, precisely as the document says— the early provision of clear, accurate information and its delivery through primed information channels". Unfortunately, there is a great deal of disinformation. Some people seem to be in the business of providing disinformation on a grand scale. The Government feel, on constitutional grounds I think, that they cannot yet intervene. That is a puzzle to me, but it relates to the point made by my noble friend Lord Barnett, that it is time the Government said, "Yes", and when.

One benefit of the document and of our debate is that perhaps it will reassure the public that we are taking the planning phase seriously, that we can say to the public that there are enormous potential benefits to be gained from EMU. If someone, perhaps, from the Opposition, would put the right subject down for debate, I would be happy to outline what I think the enormous potential benefits are. I happen to believe that they are not benefits that fall into your lap, but benefits you have to grasp and towards which the Government must lead us.

6.53 p.m.

Lord Hamilton of Dalzell

My Lords, I find myself in fundamental agreement with my noble friend Lord Skidelsky. Whatever the pamphlet is, it is not a discussion document because it leaves out the political factors. I shall always remain opposed to our joining the single currency because of our loss of sovereignty, which I think will inevitably occur. In my view, the pamphlet is designed to reinforce the impression of the inevitability that we should join. The noble Lord, Lord Simon, talked about the smooth transfer, the ability to make a choice in a hurry, flexibility, speed and all such matters. Having read the pamphlet, I turned to the front cover, fully expecting to see that it came from the "Ministry of Information"—that well-known euphemism, in countries where they have one, for the Ministry of Propaganda. The pamphlet follows the cardinal rule that if something is repeated often enough, most people will begin to believe it.

The first point that struck me was the repetition, eight times, of the blue diagram marking the 40-month period between the "decision" and the "end". It has been described by the noble Lord, Lord Simon, as "a provisional timetable". It is a clever device giving the impression of a fait accompli. Why otherwise would it be necessary to repeat such a simple thing so many times?

You have to hunt around to find out what the end is—perhaps aptly, because if we were ever to get that far, it would be the end of parliamentary democracy in this country, as we have come to know it.

Like my noble friend Lord Skidelsky, I made a note of the response of the noble Lord, Lord McIntosh, at Question Time. Indeed, I felt strongly about it because I received a Written Answer in the same vein. I have sympathy for the noble Lord, Lord McIntosh, who is captive in the position of having to answer such Questions. His instructions seem to be that all he can do is to give his name, rank and number. He might just as well say, "McIntosh, Lord, 2193131", and we would be just as wise as we are from his replies.

The opinion polls show some success in the effort to enshrine inevitability. Although the majority in the country are opposed to our ever giving up the pound, there are many people who think that we will join, whether they like it or not. I wonder whether that is a good basis on which to proceed.

Having lost all the other arguments, the selling of the idea that we will join and that there is nothing anyone can do about it is the only strategy left. It must be given the best chance possible to impress itself on the population before the difficult obstacle of the referendum has to be surmounted. To this end, the persuasion of business is vital.

The pamphlet is, in my view, aimed at continuing that process. However, I suspect that many businessmen who read it will be outraged at its effrontery in the way it tells them how to run their businesses in such elementary terms and how it attempts to inveigle them into spending large sums of money on what must still be regarded as a speculation. Surely they will see through the conspiracy that they are being persuaded to make the bet so that they will then want to see the horse run.

If the referendum goes against joining or even never takes place, money will have been needlessly squandered and the performance and share prices of companies will be adversely affected. If businessmen need more time after the referendum, why can they not have it? The real information they need on the basic assumptions of economic interest is not here. Again, my noble friend Lord Skidelsky mentioned various information that businesses would want and asked about our position as an oil producer. My noble friend Lord Cockfield mentioned how important it is to have the rate fixed at exactly the right level. But what is the right level for exporters against importers? It seems to me that you cannot satisfy both.

Will restructuring in the EU ever take place? We now have socialist governments all over the EU and it seems to me that that is becoming much less likely. There are many questions to which they must know the answer: what will be the rate against the US dollar and the yen? Since we last had a Labour Government in office, we have become a great deal more suspicious of government's expertise in corporate affairs. No doubt we had similar prospectuses for the benefits of nationalisation, the ground nut scheme, de Lorean, and the benefits of sending ships to Poland loaded with taxpayers' money so that the Polish fleet could compete on unequal terms with our own merchant fleet. Concorde and the ERM have been already mentioned. Those are just a few of the instances which spring immediately to mind. Noble Lords will be able to think of many more.

I hope that the chairmen and directors of banks, the motor car industry, the supermarkets, the City of London, and the water companies—I wondered why not the oil industry; is it because it already deals in US dollars or is it because its chairmen and directors are too clever to need it?—all of whom are paid to run their businesses and who are being offered this advice free, gratis and for nothing, will treat it with the scepticism it deserves. But before they put the document in the bin, they should turn to page 46 where they will find the green chart describing the public sector structure. There, they will see in the structure plan, the little triangles, government departments (for which they can read the Westminster Parliament) coming underneath euro ministers. I encourage them to take a pen and insert at the top "The unelected European Commission and Central Bank". They will then have its true significance in a nutshell.

7 p.m.

Lord Kingsdown

My Lords, in case I fail to make it clear in my speech, perhaps I may open by saying that my position is very close to that of my noble friend Lord Williamson. Certainly, my position is closer to that of my noble friend than the noble Lord, Lord Hamilton. I last spoke in your Lordships' House during a debate on the economy. I concluded by saying that what was then a very satisfactory situation would be perfected by the granting of independence to the Bank of England. This was received by the then Front Bench good-naturedly but as a plea inspired by special interest. Nevertheless, I admit that to my surprise that was exactly what took place within a matter of months. I have allowed myself since to feel that at least on that occasion I spoke with effect. I have been very selective about speaking since then for fear of compromising this record.

I must confess, however, to having already made a plea in respect of the subject that we are debating this evening in a publication entitled—I hardly dare say it—Kingsdown Revisited, which represented an assessment of where the United Kingdom's interest was likely to lie after the introduction of the euro. It was a report sponsored by an organisation called Action Centre for Europe and it commended the line taken by the Government then in respect of EMU, subject to the typical schoolmaster's comment "could do better". There must be a much clearer signal not only of where the Government are going but also in order to justify the need and cost of preparation in advance of a decision by the UK to join. In such circumstances I can hardly fail to approve the plan that the Government have put before us today. I was pleased to hear from the noble Lord, Lord Simon, that progress in it appears to be greater than I had realised. I would regard it as irresponsible of a UK government at the present stage not to prepare for conversion.

Lord Skidelsky

My Lords, I am very grateful to the noble Lord for giving way. As he has mentioned one of his previous publications which deals with the wider issues, does the noble Lord believe that there are any political implications in sterling joining the single currency, or in his view is it purely an economic issue?

Lord Kingsdown

My Lords, I cannot deny that there must be a political element in this, although I see it very much more as an economic matter. That is the basis of my argument this evening, as it always has been.

The UK may or may not join in the foreseeable future, but I believe it would be disgraceful if it transpired that it was in the national interest to join and we were incapable of doing so and could not qualify. Only those who believe that they can say with conviction that the UK will never join, or not for, say, at least 10 years, can argue that preparations are not now necessary given the kind of lead times that the Government's plans show and the experience so far of those who are now full members of EMU.

It is worth contemplating just for a moment what is likely to be ahead of the United Kingdom in terms of the world economic scene five or 10 years from now—indeed, well into the next century. There will be two large single markets almost equal in size: the USA and Euroland. Next in size of economy will be Japan and after that, but in a very different league in terms of size, the United Kingdom. The UK is a country with a long tradition of living by international business and with a currency, albeit small in volume compared with others I have mentioned, that is still quoted and traded in foreign exchange markets.

I believe that the constraints on our macro-economic policy in such a scene will be severe if we are to avoid the attention of those ever-hovering vigilantes—the international foreign exchange markets—whose daily turnover outnumbers the total reserves of the country dozens of times. It will also be a world in which something that has been taken for granted for generations will increasingly change. The Industrial Revolution and the rise of nationalism were roughly simultaneous changes, as a result of which economies are seen in terms of individual countries. But the great international companies whose activities are the driving force of the modern world know no national boundaries. For example, the components of a modern automobile are likely to be manufactured in three or four different countries and the final vehicle assembled in a fifth. Investment decisions will flow to whichever country offers the most advantage. I believe that, increasingly, large investors will seek to incur their costs in the currencies in which they plan to sell the final product, thereby obviating exchange rate risk. In my view, these and other considerations make it increasingly likely that the United Kingdom may well not be able to reach the highest levels of productivity or competitiveness on its own but only as a full member in a large single market.

It is argued that we may be able to avoid single currency membership of the large single market of Europe by furthering our special relationship with the United States of America. My assessment of US policy, especially economic and trade policy, is that it is coldly realistic and without sentiment towards what is not directly in US interests and that we cannot rely on special economic sympathy there if we needed it. I recollect only too well the US Treasury Secretary on one occasion concluding a discussion in a G7 (or G.5) meeting on the US dollar exchange rate with the simple words: I am sorry—our currency, your problem". I also remember Mr. Ray Seitz, US ambassador to London, saying in one of his farewell speeches that the UK's relationship with the US would be just as special as the UK's influence in Europe was great—a sentiment repeated in public by Sir Robin Renwick when he came back from his post in Washington. Whether we like it or not, Europhile or Eurosceptic as we may be at the moment, I do not believe that we can dismiss membership of EMU; and, if we cannot, given the long lead times needed for changeover, we must prepare.

Perhaps I have laboured the general point of UK membership too much when we are discussing a particular aspect of it. But the conversion plan will be expensive and involve a lot of work on a myriad of details. Somehow the Government have to convince business as well as their own departments that this expense and labour is worth while. I hope that my brief arguments this evening will help to show this to be so. I watched with interest the preparations here for the introduction of the euro on 1st January this year. Those preparations, as well as what will happen in Euroland over the next three years, will provide useful lessons for us. I believe one is that the greater the acquaintance with what is involved, the greater the readiness to approach it at least with an open mind.

My feeling is that the more the preparations proceed, the more the public reaction to the possibility of the single currency will become a matter of pragmatic judgment rather than instinctive reluctance towards drastic change—reluctance in which an emotive phrase like "economic sovereignty" is likely to play such a part.

As I have just touched on briefly, sovereignty—independence of action—is nowadays much at the mercy of forces beyond our control. What is not beyond our control is to ensure that a major decision affecting investment, economic progress—quite simply, jobs—is not beyond our capability because we have not prepared for it and cannot qualify. In this context, progress with the changeover plan is essential and I wish the Government well in that respect.

7.10 p.m

Lord Grenfell

My Lords, it is a pleasure to follow the noble Lord, Lord Kingsdown. I was not surprised to find that I agreed substantially with everything he said.

I very much welcome this debate and would like to begin by congratulating my noble friend the Minister both on the outline plan and his presentation of it. The high quality of the outline plan is a reflection of the skill with which he led the Business Advisory Group in its work which provided the Treasury's Euro Preparations Unit with the essential grist for its mill.

It is the settled policy of this Government that the people should be allowed to pick between the two options of entry into a successful single currency or staying out of it. I do not believe that the Official Opposition are against the principle that the people must have the deciding voice in a referendum in the event that the Government recommend entry and Parliament agrees. So I do not understand why they attack this outline national changeover plan as being presented in an intellectual vacuum. Do they reject the Government's logic that if we are to have the option of joining we must prepare? The noble Lord, Lord Skidelsky, asked why we cannot postpone preparations until the people have decided. But, as my right honourable friend the Prime Minister said in his Statement on 23rd February, The sheer nature, scale and complexity of the arrangements require considerable time for preparation". And as both he and the changeover plan make crystal clear, without preparation there simply is no practical option to offer to the people.

Instead of accusing the Government of trying to introduce the single currency by stealth—I regard that as an absurd charge—the official Opposition should instead be explaining to your Lordships the ridiculous inconsistency in their argument: that the people must be consulted but without a practical option on offer. That is the effect of their opposition to the publication of this perfectly sensible plan. If they think they can have it both ways, I suspect that the British people will think otherwise.

That is where the Opposition have got it wrong, and where, in my opinion, the Government have got it right. They have also got it right in recognising that even if the British people were to reject a firm and fully reasoned recommendation that we adopt the single currency, the welfare of our economy and our living standards would depend critically on how well we are able to maintain and conduct our economic trade and financial relations with our eurozone neighbours. Whether or not those against the single currency like it, the euro is with us, and every day more UK businesses are starting to trade in that currency. If, by a negative decision, we find ourselves coping with the consequences of remaining outside, we shall have given ourselves a better chance of making the best of our trade and financial relations with the eurozone by having prepared ourselves for possible entry—the point was made by the noble Lord, Lord Williamson—than by having stuck our heads in the sand in the hope that the whole thing will simply go away, which appears to be the preferred course of action of the official Opposition. If they feel that that is doing a service to Britain, I must most profoundly disagree.

I move now from the general to the particular and address briefly three specific issues. The first concerns the government decision to join—if that is their decision—the first key stage on the "critical path". I cannot dismiss the five economic tests as totally irrelevant, as does my noble friend Lord Barnett. But commentators have been suggesting that the five tests were sufficiently broadly framed to allow some necessary flexibility in judging whether and when they were met. If that were the Government's intention, I welcome it.

The first test—whether the UK economy has achieved sustainable convergence with the eurozone economies—is obviously the most critical. Our economy has been moving measurably closer to that of the eurozone in recent months. No longer growing faster than its long term trend rate, it may not be long before it falls into step with those of the Euro 11. By reducing the eurozone's base interest rate by half a percentage point, the ECB has, of course, put more distance between our rate and theirs. But if the Government maintain their tight fiscal stance, and I pray that they will, there is no reason why the current downward trend towards convergence should not be maintained.

Meanwhile, if the European Central Bank is aiming for an average inflation rate of about 1 per cent., which seems to be the case, an adjustment in our own target, sooner or later, should be in the Government's mind.

A further sign of convergence is the fall in long-term bond yields here to close to German levels, and all those developments suggest that convergence is not a pipe-dream, even taking into account the list of divergences of the noble Lord, Lord Skidelsky. I refer to them as differences rather than divergences. The Government assure us that there will be no need for sterling to shadow the euro for two years before joining, and that they have no intention of doing so anyway, whatever Commissioner Yves-Thibault de Silguy and other commissioners, acting or otherwise, have to say. But this presumably assumes that the Government foresee, without any shadowing, a period of sufficient stability for the pound in relation to the euro to head off any excuse for rejecting our entry into EMU if entry becomes the Government's recommendation to Parliament and the people.

I sincerely hope that the Government's confidence on that point is well founded. The European Central Bank appears to worry less about exchange rates than the Bundesbank did, so the euro could become more volatile against the dollar than the deutschmark was. Because our economic cycle has been better aligned to the US than to Germany, the pound has been more stable against the dollar than against the deutschmark. If the aim now is to bring the pound into a stable relationship with the euro, the greater the markets' belief that we will enter the single currency, the more surely and calmly will sterling move towards the rate at which the markets expect it to lock into the euro. Conversely, if the suspicion in the markets is that we will stay out, then there will surely be a more volatile relationship between sterling and the euro.

If their expectation is, and it seems to be, that Britain will make a positive decision in the course of 2002, and if in the meantime interest rates continue to converge, the markets will most likely hold sterling in a range against the euro in the short term close enough to the rate at which they expect it to go in. Yes, my Lords, I think that the markets will carry huge weight in this big decision.

Expectation is now really the name of the game, and that is why I have always held the view that the earlier the Government can make known their intention to enter the better. At the very least they must demonstrate their determination to take a decision as soon as is practicably possible, for many reasons, not least because the public information programme foreseen in Chapter 8 will not begin until a positive decision has been taken. That worries me as much as it worries my noble friend Lord Peston.

The second of the three issues I want to address is the cost of the changeover. The Official Opposition have been making much of what they see as an unacceptable paucity of pound signs in the outline plan. There are plenty of independent estimates around. The British Retail Consortium reportedly estimates the costs to retailers at between £1.7 billion and £3.5 billion. A Lloyds TSB survey puts the cost to small and medium-sized enterprises at £6 billion, and there are others. But the Government are quite right to reject criticism of their decision to exclude estimates beyond the reference to some tens of millions of pounds that will need to be spent over a number of years to make the information technology systems of the DSS, the Inland Revenue and Customs and Excuse euro-compatible.

I find convincing the Treasury's argument that it is difficult to disentangle costs generated by the transition from those that would have to be undertaken anyway. Further, the CBI has reportedly suggested that cost estimates are likely to be spurious because the real cost is not the cash sum but the cost of financing the spending earlier than would otherwise have been necessary. I find that plausible, too.

My third and final point relates to small and medium-sized enterprises. I take my hat off to my noble friend the Minister on the Front Bench for his huge effort, detailed in Chapter 2 of the outline plan, to raise awareness among SMEs of the implications for them of the euro's launch. It has obviously been very necessary, to judge by the results of the Treasury's EPU's two surveys which suggest a reluctance among many to face up to the challenge. While the second of the two surveys showed a doubling of awareness over six months, still only 13 per cent. had taken any action and that was principally related to information technology. Pricing strategies, marketing and staff training appear to have engaged only 1 per cent. of SMEs. This is serious and I applaud the Government for their determination to help turn this situation around.

However, here, once again, I suspect that expectation is a factor in the SMEs' reluctance to prepare. Doubts that are widespread around the country, encouraged by much of the tabloid press, that the people will approve entry into EMU in a referendum, are hardly an encouragement to make the effort to prepare. Those doubts will only fully subside when not only the SMEs but all those addressed by the changeover plan see a government wholly convincing in their arguments for entering and transparently committed in their intention to do so.

The outline national changeover plan is, in my opinion, a well conceived, practical and vital step in the right direction. We must not lose sight of the fact that meeting the five economic tests will not alone open the door to our participation in this great European enterprise which is economic and monetary union. Rightly, only the will of the people can ensure that. But only an informed people can make a decision worthy of the great question posed to them. I trust this Government to ensure that that is how it will be.

7.21 p.m.

Lord Newby

My Lords, I join other noble Lords in thanking the Minister for bringing forward a debate on the subject so quickly after publication of the national changeover plan. However, we have had a slightly strange debate because, with the exception of the noble Lord, Lord Hamilton, half of the argument has not been made. Normally, debates on European matters produce strenuous arguments against those put forward by the Government and European supporters. It is a great pity that when many Members of your Lordships' House play a part in public debate on these matters many are too busy to be here today.

As regard the line of the official Opposition, it is surprising that the conclusion of the noble Lord, Lord Skidelsky, is that we cannot yet have a proper debate on the subject. It is impossible to open a newspaper without reading about a debate on the subject and why uniquely the Opposition in this place feels constrained to take part is difficult to understand.

As regards the Government, the great shift is that the "when" word instead of the "if' word is used for the first time in this document. That was qualified on the front page—Members must be careful to use their magnifying glass to see it—but we have reached the position where, on balance, the Government are prepared to accept the principle. My Leader in another place described the plan and the Prime Minister's statement as the Government crossing the Rubicon. If that is the case, there can be few occasions when the analogy has been used to describe such a timorous advance.

However, we welcome the fact that the Government are taking steps at this early stage in order to prepare both the public and private sectors of the economy for the changeover to the euro. We must cross some hurdles before we get to that point; namely, the five economic tests. They play the part which the renegotiations played for the Wilson Government in 1974–75; there must be a pretext to justify something which might be unpopular. Although in this case the pretext is not required to deal with splits within the Labour Party, it is required to deal with splits in public opinion.

It will be necessary for the economic tests to be met, but on that front I am an optimist. Two at least are broadly met already. Clearly it will be better for inward investment if we are part of the eurozone. Anyone involved in that world admits that. Secondly, there is a view that, on balance, the City and the financial services sector will be better in it.

Two tests will always be largely subjective. The first is the flexibility to adapt to change and the second is the outlook for employment. Again, casting one's mind back to 1975, Tony Benn claimed that if Britain remained in the EU half-a-million jobs would be lost. That was not borne out by reality but at the time the argument was difficult to refute. Therefore, those two tests will be argued about but will not be capable of conclusive proof.

The final test is on sustainable convergence. I agree with those noble Lords who have said that even though there are differences between the UK's economy and cycle and those of our EU partners, there can never have been a likelihood of the eurozone and UK economies being marked closely convergent. The noble Lord, Lord Grenfell, said that there might be a need for a different inflation target in the UK. The rate of inflation in this country, calculated on the measure used across the eurozone, is not 2.5 per cent. but 1.4 per cent. Therefore, we are very close and already talking about fractions of per cent. There is already a considerable measure of convergence.

The one area where everyone agrees an issue must be resolved relates to the exchange rate. A number of suggestions have been made about how we move from what is generally considered to be too high a rate to one which would be more generally acceptable. On the one hand, we have the noble Lord, Lord Peston, seeking a miracle and on the other hand we have the noble Lord, Lord Grenfell, who has in mind a more benign scenario; that when the markets realise that we shall not be joining the euro there will be a movement in exchange rates towards the level which we and the majority opinion in this country would find more acceptable.

I hope that that is the case, but if it is not it would be difficult for the Government to set and achieve an exchange rate target. Amendments to legislation would be required and in addition to the inherent difficulties in the project that would make it almost impossible to contemplate.

The noble Lord, Lord Cockfield, sees the Machiavellian option as going into the euro when our economy is at the bottom of the cycle and therefore our currency weak. Unfortunately, our economy is at the bottom of the cycle and our currency is strong. Therefore, I am afraid that that will not be the way forward.

I turn to some of the detailed issues which arise with the changeover plan. First, the issue of legislation and the timetable. The noble Baroness the Leader of the House, in response to a question from the Leader of the Opposition when we discussed the changeover plan, said briskly, "Oh, well, you can get legislation through in a quick time and having a four month period between the decision and being able to hold a referendum would be no problem". My limited experience of this place suggests that on matters European and constitutional, if this House decides it wants to take more than "a quick time" it is adept at doing so. I do not believe that the Government should be too sanguine about taking through a referendum Bill in what, in the changeover plan, is a short period of time.

My suggestion for dealing with the matter, which I hope the Government will accept given that we are preparing, is to have the Bill introduced and passed before the next election. In my view, the most likely time for an election would be the spring of 2001, not 2002—as the noble Lord, Lord Cockfield, suggested. The earliest that notes and coins could be introduced would be February 2004. The changeover plan makes it clear that February and March is the time one would want to do that, so flexibility would be constrained. Even with an election in 2001, one could find that it was not possible to introduce the new currency until February 2005, unless legislation for the referendum were in place earlier. I urge the Government to look at that option.

What cheered me more than anything else was the announcement in the Prime Minister's statement that the Government will spend tens of millions of pounds in preparation. That cheered me up because I cannot believe that this Government, or any other, would contemplate such expenditure unless their heart was in it. I took some satisfaction from that.

The Minister was asked what assumptions had been made in the planning process as to a date by which the money will be spent and Civil Service systems will be ready for the introduction of the euro. I look forward to hearing what he has to say about that.

One thing I will say about the document's description of that process—in response to the noble Lord, Lord Hamilton of Dalzell—is that when it refers on page 46 to euro Ministers it is referring to domestic Ministers rather than euro Ministers from other member states. That is an example of the slight paranoia that can affect this debate—that if something has the word "euro" in front of it, it must be foreign and we must be against it. We are talking about Ministers designated by the Government within each government department to co-ordinate strategy.

Lord Hamilton of Dalzell

My Lords, is not the point from whom they get their instructions; to who they are attached logically? If they are euro Ministers it does not matter if they are over here or over there—if they are getting all their instructions from European Commissioners.

Lord Newby

My Lords, if it were the case that they were getting their instructions from the European Commission, it would not matter if they were here or there. If they were not getting their instructions from European Commissioners, equally that point does not bear carrying any further.

As to the business sector, the Government have got their phraseology and substance the wrong way around. It is not realistic to expect business to prepare in advance of a decision, except in the case of very large businesses and banks. It is unrealistic to expect many businesses to incur substantial expenditure without a clearer lead from government as to their intentions and the timetable. One sees that in the way that business has responded to the introduction of the euro. Big businesses were spending money, time and effort in advance of the euro's introduction but many—including those that do a lot of business in the eurozone—only started invoicing in euros and taking the currency seriously after its introduction. It is wishful thinking to expect too much planning by too many businesses at this stage—although I am reassured that many of the larger banks are already devoting significant resources to the matter.

The noble Lord, Lord Cockfield, spoke about retailers and price conversion. It seems to me that that will be a major issue. It was a major issue in decimalisation and will be more significant with the introduction of the euro. Although I understand why the Government are reticent about considering legislation, pointing out that only in Austria has dual-pricing legislation been introduced, that aspect needs further consideration, if only to give political reassurance that customers will not literally be short changed when the euro is introduced.

It is only too easy to be critical of the national changeover plan because it lacks the two things into which it needs to breathe life—a clear rather than ambiguous commitment on whether the Government really believe that we should join EMU at some point, and an indication of the timing. We on these Benches believe that it is in Britain's long-term economic and political interest to join. The sooner that is clearly enunciated by the Government, the better it will be for the UK economy and our political influence and the sooner we can begin planning properly for the changeover.

7.34 p.m.

Viscount Bridgeman

My Lords, there has been a distinguished list of speakers and we have not been disappointed by the contributions made. On the basis that the word "never" is not part of the vocabulary of those of us on this side of the House in this context, our objection to the plan is not so much its content. Any prudent preparation for entry into EMU, if and when it occurs, would require such preparation. Our objection is to its timing.

The noble Lord, Lord Grenfell, rather wrote off the costs to various businesses. If the vote goes in the no direction Sir Stanley Kalms of Dixons has said that the cost to his company would be £40 million, which will largely be wasted if we do not go ahead.

The other notable omission from the document is the point at which the pound would be locked into the exchange rate. If the pound is locked into the euro shortly after a referendum, the pound would have to start shadowing the euro, as required by the Amsterdam Treaty, before the next general election. That is in direct contravention of a reply by the Prime Minister to my right honourable friend the Leader of the Opposition on 24th February. The noble Lord, Lord Grenfell, indicated that a rather more flexible approach to shadowing will be taken. We shall be interested to hear the Minister's comments. I do not believe that the timetable of my noble friend Lord Cockfield will solve that problem.

Lying at the heart of our objections is the lack of economic convergence. The noble Lord, Lord Peston, said that the points had already been rehearsed. They have but they will not go away. An omission from the plan is that no view is expressed by the Government as to whether or not the British economy is becoming more convergent with those of the eurozone. We reiterate, that is a vital condition before Britain even considers joining the single currency. It is worth repeating these facts. The domestic mortgage debt is a totally different shape. The pensions regime is totally different, in that ours is practically totally funded whereas those of members of the euro zone are largely unfunded. There is also the point about our trade outside the EU which was made by my noble friend Lord Skidelsky.

Lastly, and most importantly, the UK is the only member state that is a net exporter of oil. The Treasury confirmed in October 1997 that that is likely to remain the case for the forseeable future, with reserves possibly in excess of UK production to date. Changes in oil prices will surely have a mirror effect on our economy and those of the eurozone, affecting the rates at which we go in. Again, that point was emphasised by my noble friend Lord Cockfield. Given the Minister's particular background, I should much welcome his explanation on that point.

Despite the damage done by Labour's policies, the UK has far more flexible rates and lower unemployment than the rest of Europe. Our labour costs are lower than in Italy, France and Germany. Our concern is that, denied the option of exchange rates, interest rates and fiscal transfers, we would be left with the danger of imported unemployment.

Finally, I refer to the referendum. The Government are committed to a referendum. In view of the Neill report, perhaps I may sound a warning note to the Government that that referendum must be fair. Are we to have a recommendation to yes, to no or to neutral? I shall very much welcome the Government's response on that point.

Therefore, it is not the principle of entry which we on this side of the House dispute; it is the timing. In our view, the Government are forcing the pace and we urge them to reconsider their timetable.

7.40 p.m.

Lord Simon of Highbury

My Lords, immediately, I thank all noble Lords who have taken part in the debate. I agree with the noble Viscount that it has been an extremely interesting debate with many high quality contributions which the Government will read with care.

I enjoyed the clarification from noble Lords on the Opposition Front Bench that the real problem with the plan is the timing rather than the content. We can argue about that—and they would probably do so for at least another decade. Our intention is to do something about entering the euro. The first practical step that we can take, as we have said, is to prepare thoroughly so that the nation has the opportunity to take a decision which can then be carried out without delay in the interests of the nation, if that is its choice. Therefore, I am sorry that the noble Lord, Lord Skidelsky, regrets that we rave put the plan on the table.

The noble Lords, Lord Williamson and Lord Kingsdown, and my noble friend Lord Grenfell put forward arguments as to why we need to prepare to give ourselves clear options—and they did that much more succinctly and with much more weight than I could. I was glad to hear those arguments because it seems to me to be pertinent that the plan should make real the options for the country. Therefore, I make no apology whatever for the nature of the plan, its contents or, indeed, its timing. The decision cannot be delayed beyond—we have made this very clear—early in the next Parliament.

My noble friends on this side of the House made extremely coherent contributions; in particular, my noble friend Lord Barnett. They have asked me whether I can clarify the position between "if' and "when". The noble Lord, Lord Cockfield, asked me quite the most complex questions that I have ever received at this Dispatch Box about whether the election will be in 2001 or 2002. They have taken me into territory for which the Prime Minister did not hire me. My psephological skills have always been known to be far less developed than my commercial skills and I shall let the matter rest there.

However, I was asked whether "if" is becoming "when" and whether the eye of the beholder is becoming more fixed upon his future target. Couched in those terms, I would say "yes". Our Prime Minister said that it is our intention to join the single currency, but we maintain the proviso that it must be in the economic interests of the country. We shall not take that away because we need time to adjust our economy so that we can put clearly to the people that it is in their interests that we join the third stage of monetary union and enter the euro.

Lord Skidelsky

My Lords, I thank the Minister for giving way. Will he explain the difference between saying, "It is our intention to join if the conditions are right", and saying, "We do not know whether we are going to join"?

Lord Simon of Highbury

My Lords, certainly there is a difference; that is what one does about attempting to make sure that the conditions are in place. The point of the five tests is precisely so that we can direct a route which will make our likely entry even more likely. The point of the five tests is that they demonstrate how the Government are setting out their progress towards changing the way this economy behaves and enabling the decision to be taken against a background of greater economic stability and predictability than we have had in the past.

Again, I am rather in the camp of my noble friend Lord Grenfell because I consider those five economic tests to be important, perhaps more important than some of my noble friends behind me have suggested in this debate. The key issues for our economy are convergence and stability with the economies on the Continent. I do not want to become involved with the noble Lord, Lord Skidelsky, in too many discussions about trade figures, but the fact is that 54 per cent of our trade goes to our continental partners and 13 per cent goes to the USA. Therefore, whichever way one tries to turn the figures, the balance and the bias is towards a stable and competitive relationship with our European partners.

I agree with the noble Lord, Lord Cockfield, that the absolute cornerstone of the single market, the free movement of goods, people and services for which we have been striving within the European Union, is the single currency because that demonstrates the competitiveness and relative productivity of the member states which are in the Union together. That is the advantage to consumers and that is why the five tests are so crucial to us.

The noble Lords, Lord Skidelsky and Lord Newby, asked me how we are doing in convergence terms and whether those tests are important. Yes, they are extremely important. It is important that we gain convergence with our inflation rate and our cost of money. It has been a major advantage to continental rivals to have a low cost of money and a sustainable investment environment which is brought about by low inflation. That is the cornerstone of our policy and is one of the five pillars on which we shall build our judgments. We are doing better. As was pointed out in the debate a year ago, there was a 400 basis points premium for short-term money which our businesses were having to pay in this country. That has been reduced to 275 basis points, broadly, in the current circumstances, and the five to 10-year money rate is also converging. It is now 60 basis points premium on the continent, or thereabouts. But we must bring ourselves into a state in which our front-end inflation expectations and cost of money are on par with those of our colleagues on the continent. They do not have to be exactly the same. Sustainability is not about single-point forecasting.

That takes me to the issue of the exchange rate, which has been raised. We do not believe that there will necessarily be a precondition of membership of the exchange rate mechanism. We do not intend to enter an exchange rate mechanism because we do not believe in a single-point forecast. We believe in following policies of sustainability, low inflation and encouragement of investment which will have outcomes in an exchange rate which the market will set, and the market will set the range of rates at which we make a judgment about the future sustainability of our position relative to our colleagues on the continent. That is how we intend to approach the negotiations with our partners which must take place in parallel with our own preparations which we have set out in outline in this plan.

Therefore, those are two key issues which have been raised on which I have tried to shed some light. As I said, the timetable will be set by the political calculations but also by our economic preparations. Our target is, as early as possible in the next Parliament, to take the decision to put this proposal to the nation.

On the exchange rate, there is no intention of entering the mechanism again, but we shall have a set of policies that will allow sustainability to be judged by the market-place, ourselves and the nation at a point at which we take the decision.

Briefly, I should like to dwell on some individual points made about that market-place. The noble Lord, Lord Kingsdown, made an extremely valid point about the nature of the market we shall be entering and the nature of world-wide competition between three major blocs, the USA market-place, the European market-place and the Japanese market-place and its surrounds. It is absolutely important that we come to terms with the necessity to take a decision about the UK's place in relation to those future competitive structures. That will be absolutely vital to us. It is not about looking back at our history, but about looking forward to where competition and market-places will take us in the future.

I agree totally with the noble Lord, Lord Newby, that we are debating these issues currently. When I open my newspaper every day, I see those issues debated all the time. It is absolutely right that they should be, but I do not understand the statement that this plan about the alternatives is being put forward in an intellectual vacuum. The alternatives about the market-place are debated quite correctly by companies all the time. Companies take their decisions.

That brings me to the points about the cost of the exercise and the risk that companies take. It allows me to answer a question raised by the noble Viscount, Lord Bridgeman, on the issue of oil. I can speak for the oil industry as I still understand that industry even after two years away from it. Once outside such businesses one's lifetime as an expert is short. I should not want to estimate either the date of the UK joining the euro or the future oil price. All I know of current levels is that they present a small problem to us in terms of the management of our economy because we do not receive many revenues at such price levels. I do not think that it is a significant feature of the economic structure.

Perhaps I may refer to major industries and their preparation costs. Major industries have been preparing, as the noble Lord, Lord Newby, said, by and large because they understand risk, reward and opportunity costs. Preparation now means that the whole process will be much cheaper. Of course, a political judgment has to be taken, but that is what most business people are paid for. They do not view life as a certainty. They look at the risks and rewards and they make their judgments accordingly. I know, from my own company, that we took a judgment at least five years ago of how the market-place would develop and we placed our bets accordingly with, of course, the approval of our board.

That is the nature of the discussion about costs. It is about risk, reward, opportunity costs and who sees a competitive advantage and is prepared to take the risk. It may well be—that is why we have spent a lot of time on SMEs, the small business sector—that more understanding and preparation is needed of the risk and reward balance. When I started this work 18 months ago, I was shocked to find that most of our SME community assumed that an opt-out meant that we would have nothing to do with the euro and that it would not impact on their businesses. We now know that nearly 50 per cent. of our small and medium-sized companies are either trading with Europe, competing with Europe or are supplied from Europe. For SMEs to assume the euro would not impact on them was very dangerous in terms of business. I believe that the awareness and understanding of the small business community will grow by the nature of this exercise of preparation. The point of the national changeover plan is to make business more aware of the risk and reward profile which is in front of them.

I have tried briefly to cover some of the main points made by noble Lords on both sides of the House in what has been an interesting and helpful debate. To summarise, I believe that the Government's policy on UK membership of the single currency has been given much support in the House. It is the right policy. It is the policy that, ultimately, will give people a genuine choice. We must prepare and then decide. The decision will be made by Government, Parliament and the people. The task for Government and for business now is to continue to make the necessary preparations to ensure that British companies are fully equipped to do business in the euro while the UK is outside the euro and to make the practical preparations for the possibility of joining.

On 23rd February, when we published the changeover plan, we made it clear that we wished to have the option of joining the euro and that the British people must be presented with a genuine choice. Now we have made a change of gear in the preparations. The public sector is leading with IT investment and detailed planning. If the country decides that it wants to join the single currency, we estimate that the timetable for a positive referendum result from that date to the withdrawing of sterling could be completed within three years.

En passant, I would say to colleagues who raised the lateness of the time that the key issue in the timetable for most businesses is the joining date, the date when the currencies become fixed, which will be early in the cycle, as early as we can make it within the outline timetable plan. Of course, for the retail sector and the small business sector, notes and coins are also crucial. However, on the risk decisions that people have queried in the debate, we have outlined in the plan the joining of the currencies, which can happen quite early in the cycle.

I conclude by saying that we are grateful for the help that we have had from the business community to produce this plan. We look forward, using the ideas we have heard in the debate today and those that we shall receive in our further consultations, to making further real, practical preparations and to preparing the next document early next year. I beg to move.

On Question, Motion agreed to.

House adjourned at three minutes before eight o'clock.