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Gibraltar: European Parliament Elections

2.46 p.m.

Lord Merrivale asked Her Majesty's Government:

Lord Inglewood: My Lords, we are well aware of the strength of feeling in Gibraltar about voting in European Parliament elections. However, permitting Gibraltarians to vote or stand in European Parliament elections on behalf of Gibraltar would contravene Annex II to the 1976 European Community Act on Direct Elections. Amending Annex II would require the unanimous agreement of all member states.

Lord Merrivale: My Lords, I thank my noble friend the Minister for that Answer, which was not totally unexpected. Nevertheless, will my noble friend agree that my noble friend Lady Chalker wrote to me on 28th June 1994 saying:

However, my noble friend did not say that it was impossible. Further, can my noble friend the Minister confirm that the citizens of Gibraltar are United Kingdom nationals for Community purposes?

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Lord Inglewood: My Lords, I can confirm that the citizens of Gibraltar are United Kingdom nationals for Community purposes. My noble friend has made some of the points regarding the problems inherent in the proposal he described.

Baroness Blackstone: My Lords, while I accept the Gibaltarians wish to vote in European Union elections, can the Minister confirm that Gibraltar does not contribute to the EU budget and that, therefore, the right of direct representation is a little unclear? Will the noble Lord also comment on how the current system regarding a group of British MEPs representing Gibraltar in the European Union is working?

Lord Inglewood: My Lords, the noble Baroness is right about contributions to the European Union community budget. Gibraltar's foreign affairs are dealt with through the United Kingdom Government. When it is appropriate for representations to be made in the European Parliament as they affect Gibraltar, I understand that this can be done both through UK MEPs and, for that matter, through any other MEPs who might wish to raise such matters.

Lord Kennet: My Lords, is this not another matter where we may look to the Church for guidance and precedence? When I was young--and, for all I know, this is still so--there used to be a Bishop of Fulham and Gibraltar. If there can be such a person, why should there not be a member of the European Parliament for West London and Gibraltar?

Lord Inglewood: My Lords, the point about Gibraltar applies equally, but slightly differently, in the case of the Channel Islands and of the Isle of Man. They all have special and individual constitutional links both with this country and, through this country, with the European Union which underlie their not sending MEPs to the European Parliament. As the noble Baroness, Lady Blackstone, commented, Gibraltar makes no contribution to the European Union budget. Moreover, it is outside the common Customs union, the common fisheries policy, the common agricultural policy and the rules on VAT. Therefore, Gibraltar is not in a position that is identical to anywhere else in which the Community rule applies.

Lord Merrivale: My Lords, I assume my noble friend the Minister agrees that Gibraltar's status is unique within the European Union. Does my noble friend agree that, if Gibraltar's population is less than one-tenth of the average United Kingdom European constituency, further consideration should be given to conferring a franchise on its citizens through the United Kingdom?

Lord Inglewood: My Lords, my noble friend is right about the uniqueness of Gibraltar. Her Majesty's Government are always anxious to ensure that Gibraltar's interests are most effectively represented and carried forward in Europe. We always endeavour to do our best to that end.

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The Economy: Inflation

2.50 p.m.

Lord Ezra asked Her Majesty's Government:

    What is their latest estimate of the underlying rate of inflation in 1997.

Lord Mackay of Ardbrecknish: My Lords, the annual rate of underlying inflation currently stands at 3.1 per cent. However, the Government expect this rate to fall back in 1997. The latest government forecast of underlying inflation was published in the Financial Statement and Budget Report, and showed that inflation was expected to be 2½ per cent. in both the second and fourth quarters of 1997.

Lord Ezra: My Lords, I thank the noble Lord for that information. However, will he not bear in mind that some doubts have been cast on that forecast and that in the January figures, although the underlying rate of inflation has remained at 3.1 per cent. as he indicated, the headline rate, much against expectation, rose from 2.5 to 2.8 per cent.? That includes mortgages. In those circumstances, and bearing in mind that the underlying rate in the UK is now running at above the rate on the Continent--for example, the rate in France is 1½ per cent.; half the British rate--does he not agree that the advice from the Governor of the Bank of England was prudent; namely, to have a small increase in interest rates now in order to avoid a larger increase later?

Lord Mackay of Ardbrecknish: My Lords, I am interested to note that the noble Lord, Lord Ezra, presumably on behalf of the Liberal Democrat Party, would like to see an increase in the interest rate. My right honourable friend the Chancellor takes the view that the economic conditions he sees now are the best we have seen in this country for a generation. Mortgage rates are close to their lowest level for almost 30 years. We are the number one choice for inward investment in Europe. Our unemployment figures are coming down. All those factors seem excellent. My right honourable friend the Chancellor and the Governor between them have delivered the best inflation record this country has had for 50 years. Low inflation remains part of our future.

Lord Eatwell: My Lords, that was all very impressive. However, will the noble Lord confirm that in the inflation figures published last week the Government have told us that of the 15 countries in the European Union only three have a higher inflation rate than the UK and the rest have a lower inflation rate? Will he also confirm that over the past year not only has our inflation rate been higher than the European Union average, but it has slowly become higher and higher relative to the European Union average? Will he please explain that lamentable performance?

Lord Mackay of Ardbrecknish: My Lords, I am not sure whether that was the party opposite asking for an increase in interest rates. I must point out to the noble

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Lord, Lord Eatwell, that five out of the six wise men have said quite clearly that they do not see any need for a rise in interest rates. That was exactly the point of the question. The noble Lord, Lord Eatwell, underlines the point that we need to keep on top of inflation in this country. In the past we have too readily allowed inflation to get out of control. This Government are determined not to allow that. The Governor of the Bank of England and the Chancellor are clearly almost of one mind because the difference of one quarter of 1 per cent. seems to me to be hardly significant.

Lord Brabazon of Tara: My Lords, does my noble friend agree that I find this a somewhat curious argument? We are arguing about differences in inflation of perhaps 0.2 or 0.3 per cent., and differences in interest rates between the Governor and the Chancellor of ¼ per cent. Yet I can remember--as other noble Lords no doubt can--when, under the party opposite, inflation rates were 10 times higher than we are talking about.

Lord Mackay of Ardbrecknish: My Lords, my noble friend Lord Brabazon of Tara is quite right; our inflation record has hugely improved and we are determined to keep that improvement on track. That is why my right honourable friend places such importance on meeting inflation targets. It is also why we are determined to keep government spending tightly under control and why we are determined to make this country an attractive place for people to invest in and produce goods and services in order to sustain the economic recovery we have seen.

Lord Barnett: My Lords, given the excellent situation the Minister has described, will he explain why we have such a high real interest rate?

Lord Mackay of Ardbrecknish: My Lords, the position is of course that the interest rate has to take account of all the various factors in the economy. Last autumn my right honourable friend the Chancellor and the Governor of the Bank of England discussed these matters and were a little concerned about inflation two years from that time. Despite people saying that my right honourable friend the Chancellor would not increase interest rates, he was prepared to do so. We believe that the current interest rate is sufficient to keep the inflation target on course.

Lord Wyatt of Weeford: My Lords, does the Minister agree that, if the party opposite came to power, instead of having a strong pound which is a powerful brake against inflation, we would have a weak pound and inflation would soar?

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