HL Deb 30 October 2002 vol 640 cc193-6

2.50 p.m.

Lord Taverneasked Her Majesty's Government:

When they expect to announce the results of their assessment of the five economic tests for entry into the euro-zone.

Lord McIntosh of Haringey

My Lords, the Government have consistently said that they will complete an assessment of the five economic tests within two years of the start of this Parliament.

Lord Taverne

My Lords, do the Government realise how this matter is becoming more urgent all the time? What is there to add to the thorough analysis carried out last April by the National Institute of Economic and Social Research, which came to the conclusion that the tests have been passed? Will the Government listen and take note of the comments made yesterday by the Secretary of State for Trade and Industry about the damage being caused by delay, as demonstrated by the fact that there has been a dramatic drop in Britain's share of foreign direct investment into the European Union from 52 per cent in 1998 to 24 per cent last year?

Lord McIntosh of Haringey

My Lords, I am interested in the suggestion that the assessment of the five economic tests should be privatised. I have a great deal of respect for the National Institute of Economic and Social Research—it once offered me a job—but the assessment is the responsibility of the Treasury.

As to the comments of the Secretary of State for Trade and Industry yesterday, she is absolutely right to draw attention to the importance of inward investment. That is why it is one of the five tests. The Chancellor of the Exchequer has said that inward investment is the key driver of productivity, growth and overall economic performance. Outside figures show that in 2001 we had a higher share of inward investment than any other member state of the European Union and the second highest in the world.

Lord Renton

My Lords, does the fact that the Government will require two years to make an assessment of this matter mean that they will not commit themselves until after the next general election?

Lord McIntosh of Haringey

My Lords, neither I nor the Government have said that it will require two years. I said that they will complete the assessment within two years of the start of this Parliament. Therefore the second part of the noble Lord's question does not apply.

Lord Barnett

My Lords, leaving aside the first of the five tests, that of sustainable economic convergence—which is virtually unanswerable—does my noble friend agree that the second test requiring flexibility is the most important? Does it include and incorporate the growth and stability pact, where greater flexibility is clearly required?

Lord McIntosh of Haringey

My Lords, I have always refused to be drawn into saying which of the five tests is the most or least important. I shall not be drawn now.

Lord Saatchi

My Lords, is not one of the first principles of a fair referendum that the people know and are crystal clear about what they are voting for? How can that be so when so many basic questions have remained unanswered? For example, what fiscal rules will govern the euro? Will it be the present so-called "stupid" rules or the rules that might replace them? Is there to be an elected president? What will Britain have a veto over, if anything? What does Mr Prodi mean by a "single economic government"? We do not even know the name of the organisation we would be asked to join. Unless the Minister can answer those questions, would he not agree that under those circumstances it is inappropriate to hold a referendum and that we should call the whole thing off?

Lord McIntosh of Haringey

My Lords, that is very interesting. I have been challenging the Opposition in this House to follow the views previously expressed by the Leader of Her Majesty's Opposition in another House for a very long time, and they have failed to do so. Now the noble Lord, Lord Saatchi, has come out, and I am delighted to hear it.

We are not holding a referendum tomorrow. A referendum will be held when an assessment of the five economic tests has been completed; when all of the accompanying studies have been completed and published; and when Parliament and the Government have taken a view on the matter. When all those actions have been completed, there will then be an opportunity for a full public debate before the people of this country are asked to decide.

Lord Peston

My Lords, does my noble friend—

Lord Hooson

My Lords, does the Minister—

The Lord Privy Seal (Lord Williams of Mostyn)

My Lords, perhaps we should hear first from the noble Lord, Lord Peston.

Lord Peston

My Lords, can my noble friend enlighten the House about the current thinking of my right honourable friend the Chancellor of the Exchequer? Will the assessment be made according to the criterion of beyond a reasonable doubt or the weaker criterion of the balance of probabilities? I know of no proposition in economics that can be established beyond a reasonable doubt.

Lord McIntosh of Haringey

My Lords, we have not used either the phrase "beyond a reasonable doubt" or the phrase "on the balance of probabilities", which I thought applied to legal matters. The phrase we have used, which will not please the noble Lord, Lord Peston, is "clear and unambiguous".

Lord Hooson

My Lords, does not the Minister agree that there is a great deal of hypocrisy about this discussion because this country, certainly in the short term, could live comfortably inside the euro-zone or outside it? The decision on whether or not we join in the end is a political one—and surely the country needs leadership on that.

Lord McIntosh of Haringey

No, my Lords. The consideration that the Government are giving to this matter is, in the first instance, an economic one. Of course there are political and constitutional implications, as we have always made clear, but it must be in the economic interests of this country. We must be satisfied that that is the case before we put the matter to the people of this country.

Lord Sheldon

My Lords, while I am satisfied that the five economic tests have already been met, there remains the problem of the exchange rate at which we enter the euro mechanism. Does my noble friend accept that this is one test that is much more important than any of the five?

Lord McIntosh of Haringey

My Lords, there is no sixth economic test; there are only the five tests.

Lord Pearson of Rannoch

My Lords, as recent research confirms that less than 10 per cent of the British economy is involved in trade with the other countries of the European Union, can the Minister tell the House why the Government are even vaguely considering joining the misguided EMU project, especially as none of that trade would be lost if we do not join?

Lord McIntosh of Haringey

My Lords, the noble Lord, Lord Pearson, and his advisers have been in constant touch with Treasury officials about these matters. I have never heard it suggested that less than 10 per cent of our trade is with the European Union—that clearly is not the case. I listened very carefully to the words used by the noble Lord, and he did not say what proportion of our trade is with the European Union. He used a roundabout phrase, which I shall read very carefully and write to him about it.

Lord Stoddart of Swindon

My Lords, is the Minister aware that the noble Lord, Lord Saatchi, does not speak for all of us who do not wish this country to scrap the pound? We would very much welcome an early referendum—indeed, as early as possible—but is not this the worst possible time to advocate entry into the euro, after Mr Prodi has described the growth and stability pact as "stupid" and the Germans and the French have indicated that they will break the pact because they have now recognised that one size does not fit all? Would it not be better if the Government rested on their laurels—which are great so far as concerns economic stability and progress—and said that we will never go in?

Lord McIntosh of Haringey

My Lords, I am sympathetic to the splits in the camp of those who are opposed to the European Union. The noble Lord, Lord Saatchi—if I read him right—is in favour of calling off the referendum, but I did not hear him propose calling off the previous procedures. On the other hand, the noble Lord, Lord Stoddart, would prefer to hold the referendum now, without all the precautions that we propose to take. They will have to sort it out between themselves. I do not speak for Mr Prodi in this House.

Noble Lords

Next Question!

Lord Williams of Mostyn

My Lords, I really think that we must move on now.