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Lord Eatwell: My Lords, does the Minister read the Sun?
Lord Mackay of Ardbrecknish: My Lords, of course I read all the newspapers. One must not read only the serious newspapers giving political points of view and other articles of news with which one agrees. The noble Lord, Lord Eatwell, probably gets no further than the Guardian or the Financial Times, but I try to read a broad spectrum of the British press.
On Monday I was being tempted to join, to adjudicate or to be the umpire or referee in the "Ken and Eddie Show". I resisted the temptation. Interestingly enough, unbeknown to me, down the corridor the Governor of the Bank of England was saying to a Select Committee of the other place much
the same as I was saying at this Dispatch Box. I must say to the noble Lord, Lord Eatwell, that tonight I shall resist the temptation to intervene in what I might call the "Ken and Malky Show". As I am a little sceptical about what I read in the newspapers, I shall attempt to explain to the noble Lord, Lord Eatwell, exactly what the Government's position is and has been for some time on the single currency and whether we should join.We have made it perfectly clear, and reaffirmed it time and again, that we believe in continuing to negotiate and to be in all the discussions on policy so that when the time comes we will take the decision in the best interests of Britain. I thought that that was now the policy of the Labour Party, having changed from its previous policy. On many occasions its Members mocked me at the Dispatch Box when I produced the policy with which it now seems to agree; that we should take a decision later and do so in the interests of Britain.
We take the firm view that the single currency will affect us whether or not we are members. Therefore, even if we were not in it, it is necessary that we help to secure a stable single currency over the long term, if that occurs. That is very important. We believe that when we take that decision it must be clear that the necessary economic convergence has taken place. If it has not taken place we believe that it will be better for Europe as a whole to delay and to get it right rather than to rush ahead.
Our conclusion, on the information that is now available, is that the convergence criteria are very unlikely, although not impossible, to be met in order to allow EMU to proceed safely on 1st January 1999. On that basis, there is a strong argument for delay by the European Union as a whole. If it proceeded without reliable convergence we would not of course be part of that and we have made that clear for some considerable time.
On 2nd February last year, my right honourable friend the Chancellor of the Exchequer said:
- "We will only agree to take part in a single currency if it is in our national interest to do so, given the circumstances at the time".
- "Any decision will be based on a hard-headed assessment of British national interest in terms of jobs, capital investment and our ability to sell goods and services in the world market."
In evidence to the Treasury Select Committee in another place, the Chancellor made it clear that a starting point would be whether it was going to work, whether it was going to last and whether it was going to achieve the advantages which the architects intended. Those would be the criteria. He said:
- "I would decide whether in the circumstances of the British economy at the time, it seemed likely to be in the British interest to participate or not".
That makes clear the Government's position in regard to the single currency. It has been a position about which we have been clear for some considerable time. I hope that that helps the noble Lord, Lord Eatwell, to understand clearly our position--
Lord Eatwell: My Lords, the Minister provided a most interesting tour d'horizon but he has failed to answer the questions which I asked. Simply, when the Foreign Secretary says, "On balance, we are hostile to a single currency", not in 1999 or at any particular time, was he stating government policy--yes or no--or was that, as the Chancellor of the Exchequer said, a slip of the tongue?
Lord Mackay of Ardbrecknish: My Lords, I thought that I had made the position perfectly clear. The balance of the argument would have to show very clearly that it would be to our benefit to change our system and go into the single monetary system. That is what Malcolm Rifkind was saying too. As I said earlier and as we have said for some time, we believe that it is very unlikely that the circumstances will be right by 1st January 1999, not just for us but right across Europe. In those circumstances, it would not be wise not just for us to join but for an attempt to be made to start the single currency if those convergence criteria have not been clearly met.
Lord Eatwell: My Lords, with all due respect, that is not what the Foreign Secretary said. He did not say that there was a balance to be struck. He did not say that we shall consider the circumstances at the time or even that we might consider the circumstances in the second round. He said:
- "We are hostile to the single currency".
That is not an issue of balance. Is that Government policy?
Lord Mackay of Ardbrecknish: My Lords, I have just explained what Government policy is. I have not had an opportunity to see what the Foreign Secretary actually said but in the context of what I have said, I believe that what he said, if it has been quoted to me correctly, is totally consistent. It depends on what happens this year, next year and in 1999 as to whether it can be started on 1st January 1999. As I made perfectly clear, at present we are very sceptical as to whether the convergence criteria will be met sufficiently well by most of our fellow Europeans in order to get the single currency off to a stable start. If it does not do that, I suspect that it would be a very dangerous voyage not just for us to start out on but for all our friends to start out on.
I go back to the speech made by the noble Lord, Lord Dahrendorf, last summer. The worst thing that could happen to us all would be to have an unstable single currency which would cause huge damage and internal pressures on the European Union. I should not wish to see that at all. Despite the efforts of the noble Lord, Lord Eatwell, I do not believe that there is quite the contradiction between the policy that I have outlined and what I suspect, when one sees the proper text of it, the
Foreign Secretary was saying and the context in which he was saying it. That will be found when tomorrow morning dawns and the reports are seen in greater detail.As regards being on track to meet some of the convergence criteria, it is extremely interesting to note that in the Red Book it is quite clear that we show there a projection to get the PSBR down below the 3 per cent. level in 1997-98 and in fact to get it to zero towards the end of the century. That is the position which is projected in the Red Book.
Indeed, the PSBR figures for January give us every confidence that that will be achieved, because the PSBR in January showed a repayment of £5.8 billion, a larger payment by £2.2 billion than was made in January of last year. Indeed, in the year to January, the PSBR was £9 billion lower than the equivalent period last year. Therefore, January was an excellent month for the public finances. Those figures are further confirmation that borrowing is on a clear downward path. We are now comfortably on track to meet the budget forecast and we may do even better than that. Some commentators in the City whom I read this morning in the financial pages of some of the newspapers other than the Sun seem to believe that also. I found the article by the noble Lord, Lord Desai, quite interesting enough for the Sun without having to turn any more pages of that newspaper. But I read in other newspapers the financial comment from the City that the position looks very encouraging.
The noble Lord, Lord Eatwell, asked me what is driving down public sector borrowing. Strangely enough, public sector borrowing is a subtraction sum of two very large figures, as I said before. One is the Government's income from taxes and so on and the other is government spending. What is driving down public sector borrowing is that we are controlling government spending extremely tightly. We have recently had an endorsement from Mr. Gordon Brown, no less, in relation to government spending over the next two years. He seems to be perfectly content with our spending plans across government. We have had to keep very tight control over our spending and we shall continue to do that. As I say, the PSBR is the difference between that tightly controlled figure and the amount of money that comes in in VAT, income tax and so on.
Therefore, I believe that we are in an encouraging position. I was not sure what the noble Lord, Lord Eatwell, was implying when he asked me about entering a single currency if it was not positively beneficial. Of course this Government have no intention of entering a single currency if it is not positively beneficial to this country. I wonder whether his right honourable friend Mr. Blair envisages that if he were ever in a position to make those decisions, he would enter the single European currency if it was not positively beneficial. That would be the most amazing statement and any policy statement of any kind, even a negative statement, would be amazing from the Leader of the Opposition who seems to want to try only, if he possibly can, to echo our policies. As far as I understand it, he too thinks we should make a decision when it is right and proper to do so. After a bit, he decided that we were right as regards the referendum and that he too should promise a referendum before we enter a single currency. I shall not
go into the other fields of government where the party opposite appears to be trying to pretend that it believes in some of the same things we believe in. If the public believes that, it will be better with the original--that is, ourselves--rather than a copy. But there is no point in electioneering in this House because, as I should point out to the noble Lord, Lord McNally, none of us has a vote in the forthcoming election so there is not much point in trying to persuade us as to how we should cast our non-existent votes.The convergence criteria and the report that we are sending to the Commission are extremely important. I refer not just to the convergence criteria to reach that point but I refer also to the stability pact to make sure that any country which gets beneath the wire of the convergence criteria can keep its economy underneath the wire. There is no point in just getting in to get a tick in the box in the year of entry and then going out of it again. That would be absolutely pointless. I am sure that everybody, except perhaps a few fanatics, will agree with that position.
We are fully in favour of reporting to the Commission. We believe that the convergence criteria are sensible and that they are absolutely necessary, along with some other qualifications, if the single currency is to start on time. As I said in answer to the noble Lord, Lord Eatwell, we are sceptical as to whether our friends in Europe will meet the convergence criteria. There is now even doubt about Germany meeting one of the important convergence criteria in relation to its public sector borrowing. I believe, as do the Government, that it would be a foolish proposition for us all in Europe to start out on this enterprise, either some of us or all of us, if there was inside the system so much instability that it was likely not to work and not to be to the advantage of Europe.
As usual, we have had an interesting debate. I thank the two noble Lords who have spoken. I look forward to a repeat performance with us in exactly the same positions next year. I commend the Motion to the House.
On Question, Motion agreed to.
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