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Economic and Finance Council
3.30 pm
The Chancellor of the Exchequer (Mr. Kenneth Clarke): With permission, I should like to make a statement about the Council of Finance Ministers meeting in Brussels that I attended yesterday.
The Council considered at some length a new lending remit for the European investment bank. We considered and approved a report on employment policy to be submitted jointly by ECOFIN and the Social Affairs Council for consideration at the forthcoming European Council at Dublin. We transacted a number of other items of routine business that I shall report to the House in due course by written answer, in the usual way.
We carried forward political preparations for the anticipated discussion at Dublin of economic and monetary union. Finance Ministers have been charged by the last European Council at Florence with preparing a progress report on preparations for EMU. Progress was made, but no final conclusions were reached, mainly because of outstanding issues that remain to be resolved on the operation of the proposed stability pact and, in particular, on the definition of an exceptional and temporary deficit for the purpose of article 104(c).
I made a constructive contribution to the debate in an effort to achieve the widest possible measure of political agreement in preparation for the summit meeting. I made it clear at the outset of the discussion that my agreement, while in line with Government policy, was subject to a parliamentary reserve and could not commit the Government until parliamentary discussions had been completed. The Irish President of the Council confirmed that my parliamentary reserve would be reported and printed on any document laid before the Dublin Council.
Only two of the texts of the draft regulations that are currently subject to parliamentary scrutiny and were the subject of my statement to the House last Monday featured in the discussions at ECOFIN yesterday. They were the regulations on the legal framework for the euro under article 235 and under article 109(l)4 of the treaty.
There had never been any question of legislative decision on economic and monetary union being taken at yesterday's meeting. The two regulations were considered and drafts will probably be attached to the eventual report to Dublin.
The Council of Finance Ministers is at present agreed that there will be no final agreement on the operation of EMU or the text of any regulations until all the negotiations are completed. ECOFIN and all member states are working on the basis that nothing is agreed until everything is agreed. I anticipate that no final agreement on any binding legislation on economic and monetary union is likely before, at the earliest, the planned European Council meeting in Amsterdam in June next year.
The draft article 235 regulation causes no problems to the British Government as it now stands. We would like to see it progressed as quickly as possible, to give greater legal certainty to existing commercial contracts in English law denominated in ecu or in currencies that might go into the euro.
The article 109(l)(4) regulation might have caused concern in this country as some people might have claimed, mistakenly, that the legislation to be enacted in
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I have also obtained agreement to changes to any text of the report that ECOFIN may eventually submit to the Dublin Council on progress towards EMU. I have obtained clear statements that membership of the proposed ERM 2 for states outside the euro will be voluntary. I have obtained explicit statements that the Council can make only non-binding recommendations under article 103 to member states outside the euro and outside ERM 2 when carrying out surveillance of economic policies.
We have, of course, been committed to economic and monetary co-operation and convergence of economic and monetary policies that have been necessary for the further development of the Community ever since we signed the Single European Act. The present treaty and practice commit us only to seek to ensure that our domestic policies are geared to price stability and sound public finances and to seek to avoid an excessive deficit. No sanctions can be applied to this country for any failure to take effective steps to achieve that unless and until we move to stage 3.
The report will deal with budgetary discipline in stage 3. The draft now states:
The outstanding matters to be resolved relate to the circumstances in which a member of the euro may not be subject to the excessive deficit procedure and possible sanctions if a deficit is only exceptional and temporary.
The preparatory work in ECOFIN is therefore proceeding precisely on the legal and political basis that I and my hon. Friend the Exchequer Secretary and others have frequently described to the House.
Mr. Gordon Brown (Dunfermline, East):
Will the Chancellor confirm that the full two-day debate that the Government promised on Europe will take place, with one day allocated, as previously suggested, to discussing these important economic issues?
Unusually for a statement to the House, particularly the first oral statement by a Chancellor after an ECOFIN meeting, the Chancellor has sought to concentrate on decisions that have not been made or that have been deferred rather than on those that have been made. He
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Will the Chancellor assure us that the outstanding questions that he mentioned will not be tied up at the Franco-German summit next Monday without a significant British input, but will remain genuinely open until discussed at the next Finance Ministers meeting next Thursday?
Will the Chancellor confirm that the Government's position yesterday was to raise no objections to the proposals on the euro? On exchange rate policy, will he confirm that while the guarantee that he mentioned confirms that economic advice from the Commission to the outs will not be binding, the Government's position as expressed by him yesterday at the summit is to raise no objection to the more central proposal that the exchange rates of the outs will be monitored and assessed?
Will he confirm that the purpose is that the Commission should ensure that Britain and other countries will avoid real exchange misalignments, and that surveillance on such market-sensitive areas will be published by the Commission? While we already knew that membership of ERM 2 was voluntary, does the Chancellor agree that he accepted a statement yesterday that member states with a derogation could be expected to join the new mechanism?
While the Chancellor has always been right to say that countries outside the euro cannot be fined, and while, as he has announced today, he has added a new stipulation that there be no legal obligation for the outs to avoid excessive deficits--something understood by everyone else in every other country before last week--will he confirm what he has failed to tell us: that the convergence programmes, which are obligatory as per the agreement made yesterday, should be developed along the same lines as stability programmes? Will he confirm that, under that agreement, convergence plans will have to be submitted by Britain every year, that they will form the basis of public comment by the Commission and that Britain then may be rebuked for failure to take necessary action?
Does the Chancellor agree with us that the difference between the Labour party and the Conservative party is that, while we and he can support the principle of monetary union, Labour is able to admit something that the Chancellor must deny for internal reasons: that, whether we join or not, monetary union will have a significant and direct impact on Britain--something that must be taken into account in any decision that we make?
"Euro area Member States will be obliged to submit programmes and will be subject to agreed sanctions for failure to act effectively on excessive deficits. In the surveillance procedure, other Member States will be obliged to submit convergence programmes only. In the excessive deficit procedure, sanctions cannot be applied to them."
I shall ensure that such statements remain in any report that may eventually be submitted to the Dublin Council. Such statements are not being challenged by any other member state or the Commission.
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