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Lord Mackay of Ardbrecknish: My Lords, over recent weeks I have dealt with a number of these issues. I hope that I have made the position of the Government abundantly clear. As far as concerns pension provision in other member states that have pay-as-you-go systems, I thought that I had made it abundantly clear that the Government were firmly of the view that there was no question of Britain having to pick up the tabs for any deficits in those schemes. That is clearly set out in the Maastricht Treaty which provides that one country will not be expected to take on the deficit of another. As far as concerns the budget of the Community, I believe that I have also made it clear on a number of occasions, as have the Government in another place, that Britain will not agree to any increase in the budget. In that we are now happily joined by a number of other countries who are either new entrants to the Community or are becoming budget donors (so to speak) and not budget recipients.

The Earl of Onslow: My Lords, can my noble friend confirm that the articles from which Britain can opt out are those referred to in paragraphs 3 to 9 of the Protocol to the Maastricht Treaty? Can he also confirm that under those articles we can be fined under the stability pact, and cannot opt out of any of them until we have specifically notified the Council under paragraph 2 that we do not intend to move to Stage 3? Therefore, we do not have an opt-out from any fine under the stability pact until we exercise our opt-out from Stage 3.

Lord Mackay of Ardbrecknish: My Lords, I am not entirely sure that I understand the thrust of my noble friend's question. We do not have an opt-out from the fines until we say that we intend to opt out. That seems to me to be logical. Our opt-out position is clearly

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delineated in the Protocol. It states clearly that we shall notify the Council that we do not intend to move to Stage 3, and we shall be under no obligation to move to Stage 3. If that happens, paragraph 5 of the Protocol delineates the articles that will not apply to the United Kingdom. I make clear yet again that if we decide to exercise our opt-out and formally notify the Council that we will not move to Stage 3, there is no possibility of our being fined under the excessive deficit procedure.

The Earl of Onslow: My Lords, is it not the case that we can be fined if we have not exercised the opt-out?

Lord Mackay of Ardbrecknish: My Lords, I find it difficult to understand my noble friend's question. If we have not exercised our opt-out but have decided to join up for the euro we shall have signed up for whatever stability pact arrangement is decided upon in order to keep the euro stable. I understand that my noble friend does not approve of the whole concept. However, I do not believe for a moment that he wishes it to be unstable, because that will damage our economy as well as our important markets on the Continent.

Lord Monson: My Lords, on the face of it there is some reassurance in the Statement repeated by the noble Lord, Lord Mackay. However, perhaps he would be kind enough to clarify one closely related matter. On "World at One" today the Deputy Prime Minister, Mr. Michael Heseltine, was asked why the Government were so determined to postpone any decision about joining EMU until June 1997 at the earliest. To paraphrase his reply, he said that in Britain's national interest it was essential to keep a seat at the negotiating table for as long as possible. Of course, one would not disagree with that. But is it not correct to say that in law we have an absolute legal right to remain at the negotiating table whether or not we announce shortly our intention to stay outside EMU for the time being?

Lord Mackay of Ardbrecknish: My Lords, I am not entirely sure whether or not in law we would be allowed to remain at the negotiating table if we said at this stage that we did not wish to enter the euro at any stage. But even if we were allowed to stay at the negotiating table I do not believe that our negotiating position would be very strong. It is important that we remain at the table and that we take a decision about whether Britain should join the euro currency scheme when that decision has to be made and when we see the results of the formal negotiations about the stability pact and how strictly the convergence factors are being obeyed. To paraphrase my right honourable friend the Chancellor (just as the noble Lord paraphrases my right honourable friend the Deputy Prime Minister), he said that if the convergence factors are fudged, brushed over and not obeyed at all, he will be doubtful about the value of joining in that kind of proposition. We are clear that we should be at the negotiating table and should ensure, whether we are in or out, that if the Euro comes about it is stable and

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sensible and that this major trading group to which we belong, and on which our prosperity heavily depends, is stable in future.

Lord Stoddart of Swindon: My Lords, if some noble Lords are sceptical about the copper-bottomed guarantees that the Chancellor has just given to the House of Commons, perhaps they will recall that the same kind of guarantees were given about our opt out from the social chapter. Yet, only two or three weeks ago we saw just how "copper-bottomed" they were when the 48-hour week and various other employment matters were imposed on this country over the head of Parliament by the European Court of Justice. As far as concerns ERM, we were told that the conditions would be agreed by the heads of state. Those conditions are already in the Treaty of Maastricht. They provide that to qualify member states must have been members of the ERM for two years. That seems to be explicit, or are heads of state, as the Commission has already done, prepared to have a creative accounting system, as they have in France, for example, over meeting the convergence criteria in relation also to the ERM? Those are serious matters.

Despite what was negotiated and agreed yesterday by the Chancellor, does Article 103 involve the intervention of the ECJ in the whole matter, and irrespective of what we agree will the decision of the ECJ just overrule what has been agreed, not just yesterday, but in any subsequent intergovernmental agreement? Was there any discussion at that meeting about the stresses and strains being caused in various countries by the restrictive nature of the convergence criteria? I am thinking of course of the lorry strikes which caused so much difficulty in France and elsewhere.

Finally, was the Chancellor helped at all in his negotiations by the intervention in our internal affairs by M. Santer when he said, as reported in the Financial Times yesterday, that pressure from the City and big business would force Britain into a single currency irrespective of any sceptical views?

Lord Mackay of Ardbrecknish: My Lords, I am not going to become involved in the internal affairs of other members states on matters of employment and the like. That we firmly believe is a matter for individual states. As I believe that to be right when they look at us, obviously it is right for us, when we look at them.

So far as concerns the ECJ, the court would be extraordinarily creative were it to overturn the clear specifications of the Maastricht Treaty, the protocol, and many of the agreements that have been made since. One cannot compare that with its decision about the 48-hour week. It would be of much greater significance than that as a legal precedent. Having read all the material, I believe that were the court to take the view, for example, that Britain did not have an opt out so far as concerns penalties, it would probably be more creative than any court has ever been, because the opt out is clear on the face of all the documents, and in all the agreements that my right honourable friend the Chancellor has reached. It is clear what it is an opt out from. It includes the fines.

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On the first part of the noble Lord's question, my understanding--all these matters are complex, but I am pretty certain that my memory is right on this--is that when a member decides that it wishes to join, it is not just its say so, there has to be a decision by the other 14 that it can join. That is the point to which I was referring earlier.

Lord Shaw of Northstead: My Lords, does my noble friend realise that we welcome the Statement specifically because it is the custom to have Statements whether or not there is much to say? There would have been severe criticism had that practice not been followed on this occasion. I welcome the fact that the negotiations show every appearance of taking longer and being more drawn out than first envisaged, because is it not true that the longer the negotiations go on the more the problems are teased out and the greater is the likelihood that a proper, long-term, satisfactory solution will be arrived at? Nothing could be worse than having a botched-up hasty decision. The longer the negotiations go on the more important it is that we in this country make our presence felt to ensure that all the problems are properly analysed and that proper solutions are found. To that end, will my noble friend take back the feelings--I hope from the whole House--that we are entirely behind the Prime Minister and the Chancellor of the Exchequer in the negotiations that they are at present conducting?

Lord Mackay of Ardbrecknish: My Lords, I am grateful to my noble friend for his support of my position here and, more importantly, the position of our right honourable friends the Chancellor and the Prime Minister. It is vital in this country's interests that we get right all the issues surrounding the euro. It is a huge step for the European Community to take, either in whole or in part, to move to a single currency. It is a step which, if it were not taken carefully and with many safeguards, could lead easily to disaster. That disaster would encompass the economies of us all, whether we are in or whether we are out. That is why we are certain that we must be in all these negotiations, ensuring that the conditions for the euro are commonsense and stable, and that Britain's voice, as an important player and contributor to the European budget, is heard throughout, and that our point of view is listened to. With my right honourable friend the Chancellor doing that, no one can have any doubt that our voice will be listened to.

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