Euro: Economic Tests (Hansard, 16 January 2002)

§ Lord McIntosh of Haringey
My Lords, the Government have said that they will complete an assessment of the five economic tests within two years of the start of this Parliament. The assessment has not yet started but the necessary preliminary analysis—technical work that is necessary to allow us to 1068 undertake the assessment within two years as promised—is under way. No separate budget allocation has been made for the preliminary and technical work for 2001–02.

§ Lord Boardman
My Lords, I thank the Minister for that reply. However, if the assessment of the economic tests indicates that joining the euro is not clearly and unambiguously to the economic advantage of this country, will the Government put off any question of a referendum during the lifetime of this Parliament?

§ Lord McIntosh of Haringey
My Lords, we shall undertake a referendum only if the five tests are met so that there is a clear and unambiguous case for joining.

§ Lord Barnett
My Lords, assuming the economic tests still stand, does my noble friend accept that it is rare for two economists to agree on almost anything? Does he therefore accept that the final decisions will be made by non-economists; namely, the Cabinet?

§ Lord McIntosh of Haringey
My Lords, I can certainly confirm in response to the noble Lord's first point that the five economic tests set out in October 1997 are still in force. My objective in responding to these matters is to sound as far as possible like a "speak your weight" machine. As regards what economists and non-economists will do, the Treasury will carry out the assessment, the Chancellor will present that assessment to the Cabinet and the Cabinet will make a recommendation to Parliament. Parliament will then decide on a referendum so that the final decision is taken by the British people who are in the main not economists.

§ Lord Taverne
My Lords, would not government money be best spent on persuading British industry to adapt to the existence of the single currency? The Treasury must be well aware that major reorganisations have occurred among large companies on the Continent to adapt their strategies to the existence of, and the opportunities offered by, the new currency. Is there not a danger that by prolonging uncertainty the Government will again put British industry at a disadvantage, as happened when the Common Market was founded and similar large reorganisation took place on the Continent but not in Britain? The Prime Minister seems worried about the matter, but is it not a case that we shall never learn?

§ Lord McIntosh of Haringey
My Lords, the Treasury is not only well aware that British industry is preparing for the fact that the euro exists, but since 1997 has consistently encouraged that. We have published a series of national changeover plans to reflect the fact that it is, as the noble Lord, Lord Taverne, rightly said, in this country's interest to be fully prepared for the euro and to be prepared for it whether or not we are ourselves within EMU. That has been a consistent part of government policy from the outset.

§ Lord Saatchi
My Lords, the EU says that we shall have to rejoin the ERM before joining the euro. The 1069 Government say that we shall not. Will the Minister give an undertaking today that after a "yes" vote in a referendum we shall not join the ERM before joining the euro?

§ Lord McIntosh of Haringey
My Lords, the Government have no intention of joining the exchange rate mechanism. Having said that, I think that the noble Lord is a little out of date. No doubt he quoted what an unnamed Commission official said yesterday about British membership of the exchange rate mechanism. However, I do not think that he has read today's Financial Times which points out that Commissioner Soldes has said that there is a margin for manoeuvre.

§ Lord Harrison
My Lords, will the Government's "speak your weight" machine say how long we have to wait before we can speak up in favour of the euro? Does my noble friend agree that political confidence in any economic project is a sine qua non of its success?

§ Lord McIntosh of Haringey
My Lords, I have no intention of seeking to censor what the noble Lord, Lord Harrison, says. His comments constitute a valuable contribution to the debate. They always have been and, no doubt, will continue to be so.

§ Lord Higgins
My Lords, with regard to the so-called convergence test, will the Government take into account in particular the experience of the United States and Canada? For many years those economies might have been thought to be convergent and at one stage the Canadian dollar was worth more than the US dollar. However, had the Canadian Government agreed to go into a single currency at that point, the subsequent effect on the Canadian economy would have been utterly disastrous.

§ Lord McIntosh of Haringey
My Lords, I am sure that that is one of the considerations that will be taken into account. I notice that contributions from the Opposition Benches always avoid actually taking a position on whether the Opposition are in favour of going into the euro. They have valuable points to make but they are peripheral.

§ Lord Pearson of Rannoch
My Lords, why do the Government continue to deceive the British people by pretending that the euro involves an economic project? The Commission and everyone else in Europe are quite open about the fact that it is a constitutional initiative, which is designed to cement together the emerging EU mega-state. What is the point of economic tests for a constitutional project?

§ Lord McIntosh of Haringey
My Lords, the noble Lord says that the Government are continuing to deceive the British people. If I were to respond to that, it would be like responding to the question "Have you stopped beating your wife?", which my wife would not allow me to do. As to whether there are other 1070 considerations, we have always said that there are other considerations but that they can be applied only once the economic tests have been satisfied.

§ Lord Peston
My Lords, is my noble friend aware that economics is a universal science and that there is therefore no concept that could be meaningfully put forward about a decision that was not economic in nature? Those who suggest that the matter is all political are simply talking rubbish. This is an economic decision problem because all problems are economic decision problems.

§ Lord McIntosh of Haringey
My Lords, I am not really one for academic discipline—I was a university fellow in economics but flunked out of that position when I discovered that I did not understand anything about it. However, my noble friend's response to the point made by the noble Lord, Lord Pearson, is very worth while.