Euro: UK Entry Assessment (Hansard, 23 October 2001)

§ Lord McIntosh of Haringey
My Lords, the Government have said that an assessment of the five economic tests will be produced within two years of the start of this Parliament.

§ Lord Taverne
My Lords, why does it take the Treasury so long since the tests were first announced in 1997? If the OECD experts can reach the conclusion that the five tests have been substantially complied with, what is keeping the Treasury? Will the Government assure us that, since the decision whether or not to join the euro is as much a political one as an economic one and there is some room for objective interpretation of the five tests, the matter will not be left just to the Chancellor so we can be sure that the decision will not be influenced in any way by personal calculations about the impact on his future?

§ Lord McIntosh of Haringey
My Lords, I believe that the noble Lord means subjective rather than objective interpretation of the five tests. I do not know whether he is right, but I am sure that that is what he meant to say. In a sense, he has answered the first question with his second. Of course there are considerations other than economic ones. We have always recognised that there are constitutional issues involved. I assure the noble Lord that the timing of the assessment which we have undertaken to make in the first two years of this Parliament is not delayed by shortage of staff or lack of will.

§ Lord Sheldon
My Lords, does my noble friend agree that of the five economic tests the most important: is the question of alignment between the economies of the other parts of Europe and ourselves? Is it not also clear that since the economic tests were set out four years ago in 1997 there has been a considerable improvement in the alignment between the currencies and that t his is not a barrier to our entry into the euro? Since 11th September, that has continued, not surprisingly. Does my noble friend agree that in three months' time the euro will be circulating not least in this country and people will understand its nature, become familiar with it and find it acceptable, which must have an impact upon the referendum in due course?

§ Lord McIntosh of Haringey
My Lords, I cannot be tempted in the direction of saying which of the five tests is more important than the others. Clearly, the first of the five tests, sustainable convergence, is of very great importance. Since 1997 there have been a number of changes both towards and against convergence between our economy and those with the single currency. I do not believe that the evidence is anything like as clear as my noble friend indicates. However, I am sure he is right that the existence in banks and pockets of a European single currency from the beginning of next year will make a very substantial difference to the way in which the matter is viewed in this country.

Lord Renton
My Lords, does the Minister agree that the Chancellor of the Exchequer, like his predecessors, has an obligation to try to control 917 inflation within the United Kingdom and that if we cease to have our own currency he will lose the greater part of his power to do so?

§ Lord McIntosh of Haringey
My Lords, experience has been that the responsibility which the Chancellor of the Exchequer has given the Bank of England in pursuance of the objective of a stable currency has been very successful. I do not believe there is anything in that which indicates any doubt about the success of such policies in or out of the euro in future.

§ Lord Tomlinson
My Lords, will my noble friend reflect that among the recent changes to which he referred was the clarity of purpose of the Prime Minister's speech at the Labour Party conference which was widely welcomed in this country? In view of that encouraging speech in relation to the euro, will my noble friend seek instructions to change the mantra that is now becoming somewhat boring and, as we are agreed in principle to join a successful single currency, perhaps start to spell out some of the benefits which will accrue to this country when we have had the assessment, the agreement of the Government and the referendum?

§ Lord McIntosh of Haringey
My Lords, it is in no sense a criticism of the Prime Minister's speech at the Labour Party conference to say that some of the reactions to it were rather exaggerated. He said that if the assessment was favourable and the Government took a decision, there was no reason why there should not be a referendum within this Parliament. That has been both implicit and explicit in government policy for a number of years.

§ Lord Newby
My Lords, the Minister said that the assessment of the tests would not be delayed by lack of resources within the Treasury. Can the noble Lord say how many members of staff within the Treasury are now working primarily on the assessment of the tests, and to what timetable?

§ Lord McIntosh of Haringey
My Lords, no. If one looks at the five economic tests and the question of investment, the financial services industry and employment, it is obvious that a very large number of people in the Treasury are working on the issues which build up towards the assessment of the five economic tests. How many of them are working on it primarily is really a secondary issue. The point is that we have the capacity to undertake the assessment. Clearly, it is not an assessment that can be undertaken lightly at monthly meetings of the Monetary Policy Committee. One does not sit down on a Wednesday morning and announce the results of the assessment at Thursday lunchtime or Thursday afternoon. It does not work like that.

§ Lord Pearson of Rannoch
My Lords, instead of concentrating so much on the comparatively irrelevant five economic tests, would it not be more helpful if the 918 Government were to explain to the British people how they propose to get around EMU's basic flaws, which are that one interest rate must fit a dozen different and diverging economies, where there is no common language, little mobility of labour and where interstate transfers on the scale required to hold the United States of America together, and indeed the United Kingdom, simply do not exist? What are the Government going to do about the real problems with this crazy project?

§ Lord McIntosh of Haringey
My Lords, since I do not accept the premises of the noble Lord, Lord Pearson, I can hardly be expected to follow him in his conclusions. There are issues on both sides. Otherwise, we would not be undertaking these economic assessments. But if we look at the balance of benefits and disadvantages—taking the opposites of my noble friend Lord Tomlinson and the noble Lord, Lord Pearson—it is clear that there is considerable thinking to be done. We are doing that.

§ Lord Barnett
My Lords, will my noble friend accept that in practice the five tests are virtually never achievable if one takes the sustainability argument within them? Therefore, is there not only one serious test, namely convergence between sterling and the euro? Is there any particular reason why the Government are not willing to accept that it will be possible on that test—an announcement that we are to go in, as I hope we are, in itself will do something in that direction—to negotiate a devaluation between the two currencies?

§ Lord McIntosh of Haringey
My Lords, that is an interesting thought. Those who have tried to negotiate devaluation have realised on many occasions how little exchange rates—after all, these are floating exchange rates—are at the beck and call of governments of whatever colour. There are considerations which have to be taken into account in reaching the assessment and coming to a conclusion. There are also effects which will take place after the Government's decision and recommendation to the people of this country. Those are equally significant.

§ Lord Saatchi
My Lords, is the Minister aware that in his answer to the noble Lord, Lord Taverne, the noble Lord flatly contradicted his own Chancellor. If I heard the noble Lord correctly, he thought that there were constitutional considerations concerning the joining of the euro whereas the Chancellor of the Exchequer has said the exact opposite.

§ Lord McIntosh of Haringey
My Lords, on the contrary. The Chancellor of the Exchequer has always said that there are constitutional considerations but that they are not insuperable.

§ Lord Tanlaw
My Lords, can the Minister tell me whether I am correct in assuming that if the country joins the single European currency we will switch to the harmonisation of European time?

§ Lord McIntosh of Haringey
My Lords, may I be tempted into a personal opinion which is that I rather agree with the noble Lord, Lord Tanlaw? However, it does not follow from our entry into a Europe of single currency.