| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
Lord Pearson of Rannoch: My Lords, perhaps my noble friend will forgive me for interrupting. I fear that it will be claimed by some other member state or even by some major industry that we were acting in that way: perhaps we had opted out altogether; perhaps they felt that we had too much of an advantage. Because those clauses are not covered by opt-out, it could then go to the Court, about which some of us have the gravest doubts.
Lord Mackay of Ardbrecknish: My Lords, I shall reiterate what I said at the very beginning of my comments on Article 102a; namely, that I see no prospect of a member state being taken to the ECJ for failing to honour its obligations under that article. I shall leave my answer to my noble friend at that.
The Government support economic policy co-ordination and surveillance. They already receive recommendations about economic policy from other
international bodies: the IMF and the OECD. I am happy to say that we usually receive reasonably benign advice from the IMF, unlike the party opposite who received rather telling advice from the IMF about 20 years ago or thereabouts. About 20 years ago this week, I think, the IMF were giving some instructions to the then Labour Government about what they should do.
Lord Bruce of Donington: My Lords, is the noble Lord aware that his reference to the Labour Government's relationship with the IMF during the period he mentioned is wholly inaccurate and has been proved to be wholly inaccurate on a number of occasions? In point of fact, the amount of the financial advances made to the United Kingdom in 1976 was repaid within a matter of months. The whole facility was unnecessary because an error was made by the Treasury to the tune of £4 billion in its estimate of the PSBR.
Lord Mackay of Ardbrecknish: The Labour Government may well have repaid the money, but initially they had to ask for it and initially to the IMF. My recollection is that the noble Lord, Lord Healey, had to make a hurried change in his plans and come back from the airport to deal with the matter. I just make the point that we do listen to the advice of bodies such as the IMF and the OECD.
Any recommendations from the Council of Ministers--I want to emphasise this--would be non-binding. That is clear from the treaty, not least under Article 189. My right honourable friend the Chancellor has also gained agreement that the report from ECOFIN to the European Council in Dublin will make the non-binding nature of any such recommendations explicit. I hope that that might be accepted by my noble friend Lord Pearson and others as a positive step to put what I think is described on the face of the papers as the British position.
I turn to the proposals for a new exchange rate mechanism--the ERM2. There is now full acceptance that ERM2, like the existing ERM, will be voluntary. It will be based on intergovernmental agreement, also like the existing arrangements. The Government agree with the committee that exchange rate stability is valuable for making the single market work well. They believe that the essential conditions for exchange rate stability are sound public finances and low inflation. On both those measures the UK has a good story to tell.
The Government have made clear that they have no intention of rejoining the present exchange rate mechanism or any similar arrangements. The committee is, however, concerned that prior membership of ERM or ERM2 might be needed to join the single currency. To that I would reply that the Government's view is that de facto exchange rate stability is more important than membership of a mechanism which has changed substantially since the treaty was written and which allows currencies to fluctuate within 15 per cent. bands rather than the original 2¼ per cent. bands. I urge your Lordships to
look at Article 109j, to which our attention was drawn by my noble friend Lord Tebbit. Article 109j talks about:
- "the achievement of a high degree of sustainable convergence".
- "the observance of the normal fluctuation margins provided for by the Exchange Rate Mechanism".
- "We are deliberately trying to ensure that a country that meets all of the convergence criteria would not be penalised by the formal and legal requirements of ERM membership".
On a related point, I note the committee's desire to be kept informed about decisions on ERM2. That is why the Chancellor wrote to the committee when he felt unable to provide the document written by the European Monetary Institute. Although the formal agreement on ERM2 will not be based on Community legislation, I can assure the noble Lord and his committee that they will be kept informed nonetheless.
I now turn to the legal framework for the euro, about which not much has been said. It is an important aspect, certainly in relation to the financial markets and the City. The proposal consists of two draft regulations--one under Article 235 of the treaty, the other under Article 109l(4). Negotiations on those have now progressed since the original proposal.
The Government are pleased that the committee recognises the importance of adopting some of this framework under Article 235. The Government have supported the use of that legal base and favoured the adoption of the regulation as soon as possible in the interests of giving markets greater legal certainty about the euro, especially concerning contract continuity and the rules for conversion and rounding. It also means that this legislation, which is of great importance to the United Kingdom's financial sector, will apply unambiguously within the United Kingdom whether or not we adopt the single currency.
It is our view that the Article 109l(4) regulation cannot apply to the United Kingdom if we do not participate in the single currency. Paragraph 5 of the United Kingdom protocol would specifically disapply Article 109l(4) from the United Kingdom in those circumstances. My right honourable friend the Chancellor secured at ECOFIN this week amendments to the regulation that make clear that its application is subject to the United Kingdom protocol.
As to the substance, the Article 109l(4) regulation is now confined to the monetary law of the participating member states and to the detailed arrangements for the transitional period. As such, the regulation is relevant to the participating member states only. The key provisions on contract continuity which are necessary in all member states are now in the regulation under Article 235. I am happy to provide the committee with reassurance on that point.
I see that I have spoken for nearly half an hour; I could continue for some time longer but that may try the patience of your Lordships. To sum up, we believe that the United Kingdom is in a very enviable position on the single currency. That is thanks to the opt-out which the Prime Minister obtained at Maastricht. We now have a choice on whether or not to join the single currency. My understanding is that the party opposite--the noble Earl, Lord Russell, is not in his seat; he sometimes chides me about that phrase--the main party opposite now seems to believe that that is a perfectly sensible and welcome position in which to be.
The Government's decision will be taken on one basis only--that of the national interest of the United Kingdom. That decision will be taken only when we have a clearer view of the implications for Britain. Again, I think--I think--I welcome the opposition party, after a lot of huffing and puffing on this issue, to that point of view as well. We still cannot know which countries will meet the necessary conditions for joining the single currency, what degree of convergence will have been achieved by 1999 or what the economic circumstances will be. There are also some important decisions to make on the technical aspects of the introduction of the single currency. It would be a mistake to make a decision as important as this without the benefit of all the facts. As my noble friend Lord Beloff said at the end of his speech, we should take care. That is good advice from whatever point of view in the European debate one comes.
In the meantime, we will continue to play a full part with our European partners in the preparations that are necessary. It is essential that the United Kingdom's voice is heard in these discussions. EMU will affect this country whether or not we take part. If EMU goes ahead it is essential that it is based on firm foundations. If it were to fail, it would have disastrous consequences for the European Union and for the single market. Those arguments I feel--and hope when I read the debate again--received widespread support in your Lordships' House this afternoon. I welcome the report. It is a helpful and useful report. We look forward to many more discussions with the committee submitting more papers, keeping it busy for much longer, and also to
taking part in debates in your Lordships' House about the reports, though perhaps we can all hope that they do not last quite as long as this one.8.34 p.m.
Lord Barnett: My Lords, I thank the noble Lord--I usually refer to him as "the Minister" because I find it difficult to say his name--for his response. I agree with much of it, especially as I have already said it and particularly since I quoted the Chancellor's letter, of which I assume he has a copy. I am grateful to him.
After such a long debate I doubt whether many of my noble friends will want me to reply at length. It occurred to me that I could take an hour and a half but, as some of my noble friends wish to speak in the next debate, I shall try to avoid that.
We have had, in the main, an excellent and serious debate. Noble Lords who heard it will agree with what I said at the outset when I referred to the excellence of the noble Lords on my committee. They proved it in their speeches here today.
I hope I will be forgiven if I do not refer to every speech in the debate--I can see that I will be so forgiven. I am neither sorry nor disappointed that I did not convince the Euro-sceptics, on either side, whether they are smiling, or not smiling, of my argument. I know that the noble Lord, Lord Tebbit, likes to smile occasionally to make himself look nicer than he really is. Let me make it clear that I have always said he is a nice fellow, but he does not like to let anybody know that he is so nice. He may feel that it is an insult to be called a "nice fellow", but that is what he is. I am not surprised that I did not convince the Euro-sceptics--indeed, I would have been surprised if I had done so--to change the view that they have held for a long time.
The idea that outside EMU or the European Union--in the words of the noble Lord, Lord Tebbit--we could manage our own economy is absolute nonsense. That point was made by the noble Lord, Lord Grenfell. We cannot ignore what is going on in the real world of Europe and elsewhere. We cannot manage our economy ignoring all of that. Sterling and our economy will be seriously affected whether we are in or out, and if we are out altogether we will have no say or influence in what is happening. That is why I hope noble Lords will accept that that point is a nonsense.
Next Section
Back to Table of Contents
Lords Hansard Home Page