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Lord Baker of Dorking: The noble Baroness was very frank at the beginning of her last intervention when she said that the clause was a Labour Party manifesto commitment and that it should therefore be implemented. In fact, if one considers carefully the Labour Party's policy before the election, one sees that this is its one specific declaration. The rest of the Labour Party's education policy amounted to the clever use of adjectives--but I believe that we have a government of adjectives. This is a specific commitment and it is therefore appropriate that it should be part of Clause 1 of the Bill. To the extent that it is a commitment, it should be on the face of the Bill.

However, I hope that the Minister realises the complexities and difficulties of implementing such a policy, which were mentioned by a noble Lord opposite. A class of 29 can swell to a class of 32 because of the influx of gypsy or travelling children or simply because new families have moved into the district. The school will then get an extra teacher. However, the situation could be reversed and the class may decrease to 28. It will then have to go back to having one teacher.

This is a random way of spending £120 million. I only hope that, as the debates proceed and the regulations become more specific, the Minister will indicate exactly how the provisions will work in practice. I suspect that such things are best left to local management of schools. It may well be that when a class temporarily increases to more than 30 children, the money could be better spent in another way rather than on an extra teacher. Only the school will know. A school

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may be situated in a rural area or in a difficult inner-city area. Even if we are talking about a manifesto commitment, it will be very difficult in practice for schools to operate within such a strait-jacket.

Baroness Blatch: I very much agree with my noble friend Lord Baker. I tabled the amendment because, given that the Labour Party had made such a specific promise, I thought that such a provision should appear unequivocally on the face of the Bill. I believe that local schools would like to be able to decide their own priorities. I agree with the Minister that, by and large, schools will welcome the thrust towards smaller classes in this age group. However, I want the Minister to know that delivering this policy will result in real pain. The 31st or 32nd child in a class will be bussed out of the village in which he or she lives and away from the school attended by brothers and sisters. Is the Minister saying that siblings will be protected, along with denominational preference and parental preference, and that no child will have to go to a school that is poorer in terms of performance standards than that in his or her locality?

I agree with the noble Lord, Lord Dormand; I took down his words precisely. He said, "Some of the problems being raised now simply cannot be met". That is right. The Minister will find that this is a blank cheque because capital moneys have been promised as well as moneys for teachers. Those of us who have been in local government know that, down the line, that means pre-empted local government moneys, irrespective of their priorities as local education authorities or the priorities of the schools themselves.

Perhaps I may clear up a slight misunderstanding with the noble Lord, Lord Walton of Detchant. If a school thought that it made more economic sense to have a teacher-assistant for the 31st or 32nd child rather than a costly, fully qualified teacher, I would not want anybody to think that I was suggesting that the teacher-assistant should be the teacher of the 31st or 32nd child. I was simply saying that that person might assist in the classroom with the management of the 31 or 32 children. Where the parents want it, the governors are happy to accept it and the school is also happy to accept it, that makes economic and educational sense. In those circumstances there should be flexibility to accede to local preference. That is not allowed for in the legislation. When one is considering the interests of rural England, I believe that to be a great pity. It is disproportionately uneconomic to tie up one qualified teacher for possibly one or two children.

Lord Peston: I apologise for interrupting the noble Baroness. I realise that we want to get on to other business. We do not want to delay the Lord Privy Seal or the Leader of the Opposition. But for my sake can she just clarify this matter? Does she want "30" on the face of the Bill or not? I am sure that it would help my noble friend if she answered that she wants that number on the face of the Bill.

Baroness Blatch: I am looking for honesty and integrity as regards this policy. We would not put

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"30" on the face of the Bill. We would be doing what we can to free up as much money as possible and as taxation will allow in order to provide the local education authorities and the schools themselves with the money to determine local priorities. I have said to the Minister that I believe most primary and infant schools wish to re-emphasise the importance of spending that money on the lower age groups. Therefore, I put my trust in the schools and governors themselves, supported by the parents, in proposing that that is the best way to deal with the matter.

The Government display a rigidity which will be difficult to deliver in practice. As I said, we have heard early mutterings of concern from the Treasury because this is a kind of blank cheque. We shall come later as to how much of the policy can be met by savings from the assisted places scheme.

My noble friend Lady Seccombe raised a very important point. If the Government mean what they say and intend to put this provision on the face of the Bill, and if action were to be taken under the 1996 Act, then who would be the guilty partner? Would it be the school, the governors or the local education authority? If the school, the governors and the parents agreed to take the 31st child but one parent said--and the law says so--that she wanted her child educated in a class of 30, and if, as the noble Baroness suggested, action were to be taken under the 1996 Act, who is the guilty partner?

The noble Baroness said that she was discussing ways of giving effect to the recommendations of the Delegated Powers and Deregulation Committee. I very much welcome that. I hope that I shall be able to welcome the next recommendation of that committee that the regulations which ensue will be through the affirmative resolution procedure. Perhaps I may ask one last question for clarification. Is the noble Baroness saying that in principle the ministerial decision is that "30" will be on the face of the Bill and that the discussions taking place are as to how that can be done and what the form of words will be, or is it the case that the Government are discussing with counsel whether it is appropriate to put that figure on the face of the Bill or keep it, as proposed at the moment, in regulations?

Baroness Blackstone: I shall answer the two questions that the noble Baroness has raised. I hope that she will then be able to withdraw her amendment and wait until we come forward with proposals. It is the Government's decision to accept the specific recommendation of the Delegated Powers and Deregulation Committee on "30". As regards the specific question of what would happen if a school failed to obey the law in that respect, local education authorities will be responsible except in the case of voluntary-aided schools where the governors would be responsible. I hope that that answers the two questions asked by the noble Baroness. The only other point

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I wish to make is that I hope she does not believe what she reads in the newspapers about the views of the Treasury. That is pure speculation.

Baroness Blatch: On the basis that harmony has broken out in the Treasury and the Cabinet, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Baroness Farrington of Ribbleton: I beg to move that the House do now resume and that the Committee stage be adjourned until after the Statement.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

Economic and Monetary Union

4.44 p.m.

Lord Richard: My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Prime Minister about the meeting of the European Union Heads of State and Government on economic and monetary union which he chaired in Brussels on 2nd May. My right honourable friends the Chancellor of the Exchequer and the Foreign Secretary and my honourable friend the Economic Secretary were also present. The Statement is as follows:

    "The aim of the meeting, and separate meetings of the Finance Ministers during the weekend, was to take decisions on which countries would participate in the single currency from 1st January 1999; on the nominations for the president, vice-president and members of the executive board of the European central bank; on the bilateral conversion rates that will apply between participating currencies from 1st January; and on fiscal discipline and economic reform. I have placed a copy of the resulting documents in the Library.

    "The Heads of Government had before them a unanimous recommendation from the Finance Ministers on which countries should be in the first wave of economic and monetary union, and a supporting opinion from the European Parliament, which had met that morning to consider the Finance Ministers' recommendations. Heads of Government agreed unanimously that the following 11 countries should join the single currency from next January: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.

    "We also agreed without difficulty on the following nominations for the executive board of the ECB: as vice-president, to serve for four years, M. Noyer; and the following four ordinary board members: Herr Issing, to serve for eight years; Signor Padio-Schioppa, to serve for seven years; Senor Domingo, to serve for six years; and Mrs. Hamalainen, to serve for five years.

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    "Heads of Government also agreed on Saturday night a statement that, in future appointments to the executive board, appropriate weight and consideration will be given, according to a balanced system of rotation, to recommendations for nationals of member states not on the initial slate.

    "The declaration on fiscal discipline and economic reform, which was adopted by Finance Ministers on Friday evening, is a significant document, building on a UK presidency initiative at the York informal ECOFIN in March. It emphasises the importance of fiscal consolidation in high debt countries and economic reform--both essential to help create jobs and to ensure that EMU is successful.

    "All these issues were decided with relative ease. However, as is well known, there were very difficult negotiations over the presidency of the European central bank and it is important to set them out in detail. There was ready agreement on the following. First, that Wim Duisenberg, the current president of the European Monetary Institute, and a highly respected former Dutch finance minister and governor of the Dutch Central Bank, was the best choice as the first president of the ECB. As president of the European Monetary Institute he has already been in charge of the practical preparations of the euro. As president of the ECB he will be well placed to continue this role. Secondly, that we expected his successor to be French. President Chirac made clear his nomination would be Jean-Claude Trichet, again an experienced and respected governor of the Banque de France. Thirdly, that both nominations should be for the full eight-year term. Where there was disagreement was not on the substance of any of this but on the length and form of Mr. Duisenberg's tenure as president.

    "Because of the controversy, not least in the European Parliament, it is important to be clear what the precise issue at stake was. Much of the subsequent press reporting has rested on this simple factual inaccuracy: that Mr. Duisenberg intended and wished to serve for a full eight years, as opposed to being nominated for that time, which is the time stipulated under the treaty.

    "In fact this was not, and has never been, the case. Eighteen months ago, before any French candidate had been suggested, Mr. Duisenberg very properly made it clear that he would not want to serve a full eight years, in view of his age. Indeed, he did so publicly. At that time he was saying he would not guarantee staying more than two years. Later he talked of between three and five years, but he did insist on being nominated for eight.

    "The issues for us were therefore these. If he wouldn't serve the full term was it nonetheless right to appoint him? What was the minimum term we should ask of him? Should there also be a maximum term, given the circumstances?

    "The answer to the first question was yes, in our view, because as president of EMI and a highly respected central banker, Wim Duisenberg was plainly the right person to launch the euro. The

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    answer to the second question was again clear for us: he should at least stay until the euro was launched and all transitional arrangements, particularly the introduction of the notes and coins, were in place. This accorded with Mr. Duisenberg's own wishes that he oversee this process and step down shortly after. It was over the answer to the third question that there was disagreement. Some preferred a fixed date for Mr. Duisenberg to retire, while others argued that this would not be consistent with the treaty. The protracted discussions were essentially over how to resolve this. Mr. Duisenberg's view, backed by ourselves as presidency, was that, though his intention was clear, there could be no question of there being any formal, obligatory end to his term.

    "In the end Mr. Duisenberg's view prevailed. At my suggestion, he stated his position personally, in his own words, to the Council. He explained that, because he would be 67 in 2002, he did not wish to serve the full term, but that it was his intention to see through the transitional arrangements for the introduction of euro notes and coins, including the withdrawal of national notes and coins. He made clear that the decision was his and his alone. At the end of the negotiation, the Heads of State and Government accepted this.

    "I have no doubt at all that, though the process was very difficult, the decision was right. What is more, since Mr. Duisenberg is under no obligation whatever to retire early, it is entirely consistent with the treaty. Moreover, if the nomination of Jean-Claude Trichet is eventually confirmed, as I expect, this will mean that two highly respected and experienced central bankers known for their independent views will be in charge of the European central bank for a total of 12 years. This is an outcome which ensures long-term stability.

    "We were told financial markets would react badly and the pound would go through the roof. In fact, the deutschmark has risen against both the pound and the dollar since Friday. Stock markets in France and Germany are higher than at the close of business last week. British 10-year gilts have not moved since Friday. The markets across Europe and the rest of the world are calm. What they know, as we know, is that the fundamentals are right, a good board is in place and the euro will be strong, not weak. Many people had said the euro could not be launched on time or with a wide membership and that the argument about the presidency could not be resolved satisfactorily. In the end, all these issues were resolved satisfactorily and the single currency will become a reality on 1st January 1999.

    "The United Kingdom's own position on joining EMU was made clear by my right honourable friend the Chancellor of the Exchequer to Parliament on 27th October. It has not changed. But, in or out, it is in Britain's interests that the single currency is successful and strong. The decisions this weekend, despite the frustrating nature of the process, were in the end the right ones--right for Europe and right for Britain.

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    "The House will nevertheless agree with me that the biggest challenge to Europe lies ahead. To ensure that the single currency is successful, member states must continue to implement reforms of product, capital and labour markets and to promote employability and job creating entrepreneurship. That is the way to a genuinely prosperous future for Europe. It is what we will be pursuing at the European Council in Cardiff.

My Lords, that concludes the Statement of my right honourable friend.

4.53 p.m.

Viscount Cranborne: My Lords, the House will be grateful to the noble Lord the Leader of the House for repeating the Statement made by his right honourable friend in another place with his usual verve and conviction, although I believe that it must have strained even his powers of stage management to imbue that quality of conviction into his delivery of the Statement. But I agree with him on one point. This is a matter of some importance to this House, to the future economic management of this country and to the future economic prosperity of western Europe which matters so much to all of us.

Perhaps the noble Lord will recognise the following quotation:

    "The criteria for monetary union should not be fiddled, fudged or botched in any way. If they are, the answer is not to delay--the answer is not to proceed".

I am sure that the noble Lord will recognise the typical orotundity of the Prime Minister, in this case the ringing endorsement that he delivered on 4th June last year. Does the Leader of the House believe that the deal that he has announced to the House this afternoon conforms with the provisions of the Treaty of Maastricht and is not a fudge of the criteria set out in that document?

I give two examples where I believe it may be helpful for the noble Lord to explain to the House why he believes that it conforms to the provisions of the treaty. First, how does such an assertion square with the overall indebtedness of Belgium and Italy? Earlier this afternoon we covered this particular matter at Question Time. I believe that in this case conformism is the essence of virtue. I have heard it said that the Labour Party is occasionally more Methodism than Marx but, surely, this takes non-conformism too far.

The second example is the appointment of Mr. Duisenberg. The Statement indulged in casuistry of an extraordinary kind of which the Order of Jesus would itself be proud. Does the noble Lord agree with the member of the Bundesbank Council who is quoted as saying that the deal under which Mr. Duisenberg is to stay for only four years is a clear breach of the Treaty of Maastricht? Further, does he agree with Pauline Green, Leader of the Labour Group in the European Parliament, that the deal was accompanied by "unacceptable shenanigans"? The Treaty of Maastricht stipulates that the president of the bank should serve for eight years, yet the Prime Minister was still reported as saying--he said it in the Statement repeated this afternoon by the Lord Privy Seal--that he was "maintaining entirely

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the sanctity of the treaty". I find it difficult to understand--perhaps that is more my fault than that of the noble Lord--how that contention can be sustained when it is clear that Mr. Duisenberg has absolutely no intention of staying for more than four years in the first place. How does that conform with the treaty, in spite of the rather elaborate explanations that the House has been privileged to hear this afternoon?

I believe that this is yet another example of Bellman politics. If the Government say it three times it must be true. Is it not much more convincing to take the evidence of one's own eyes and ears and conclude that the euro has been floated on a liquid sea of fudge? How is it possible, in the light of this latest addition to that liquid sea, to suggest that we are witnessing the launch of a solid, stable currency? After all, many believe that the Maastricht criteria are in themselves insufficient to ensure long-term convergence, particularly in view of the one-off measures that a number of aspirant members of EMU have had to adopt to get as far as they have.

Further, has the Lord Privy Seal noted the remarkable comments on the Prime Minister's chairmanship of the summit, particularly those made by the Prime Minister of Luxembourg and the Austrian Chancellor, who I believe was quoted as saying that he had never seen anything like it in his experience? I assume that that was a compliment. Can the Lord Privy Seal confirm that? Can he also tell the House whether, in view of the nature of the public comments of the Prime Minister's friends in Europe, he has received any private comments about his chairmanship in addition to those which the press picked up and whether they have been any more helpful?

I hope, too, that in view of the fudge, the noble Lord will share my gratitude to my right honourable friend the former Prime Minister, Mr. Major. He was skilful enough to negotiate an opt-out from EMU so that we could have the privilege of not having to take part in the fudge and at the least to see how events develop before the British people at a later date decide whether to join.

In that context, can the noble Lord explain to the House whether he regards EMU as purely an economic project or whether he agrees with Herr Waigel who said that he regarded EMU as a stimulus for European political union? If he disagrees, can he explain to the House how such a fundamental disagreement about the objectives of the policy can be resolved and European unity of purpose still be maintained?

On a more technical matter, can the Lord Privy Seal guarantee to the House that so long as we remain out of EMU we will keep our ability to set our own rules on clearing bank cash reserve ratios? I am sure that the noble Lord will have noticed that the Select Committee of another place addressed that matter and that some people who gave evidence believed it to be a technical

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matter which could have considerable effect on the ability of this country, in particular the City of London, to sustain its present competitive position.

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