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Lord Grenfell: My Lords, perhaps the noble Lord will allow me to intervene. We are not giving up powers to tax. Under EMU every government has the right to tax high if they wish to spend high or to tax low if they wish to spend low. We are not surrendering the power to tax.

Lord Pearson of Rannoch: My Lords, I accept the point raised by the noble Lord, except that those of us who know how the European Union proceeds are well aware of the discussions now in Brussels about the necessity for a unified tax system under EMU. They are very much more confident and advanced than they were even before the absurd events of a fortnight ago. The particular machinery to which I should have referred--and to which I did refer earlier--is the single interest rate and the single foreign exchange rate for disparate and diverging economies.

I come back to the point made by the noble Baroness, Lady Williams, that we gave up our sovereignty, or some of it, or much of it, to join NATO and therefore what is the problem now with the EMU project or, indeed, with the whole European project. The answer of course is that we can leave NATO when we want, but we cannot get out of the quagmire, the quicksand, the quaking bog of the Treaty of Rome into which we have so foolishly strayed already.

Finally, the noble Baroness, Lady Williams, said that those of us who doubted that EMU would start on time have been proved wrong. That is not quite right. We said that we did not think that the proposed countries of the Economic and Monetary Union project would meet the requirements. In that we were quite right. We did not foresee with complete clarity that the European enthusiasts would go ahead and fudge the issue and carry on, whatever the treaty said, in any case.

Then the noble Baroness said that she wanted to congratulate the participating nations which are joining EMU on having got to the station and got to the train

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on time. The trouble is that we have not the faintest idea where the train is going, but there are some very dangerous signals ahead.

Lord McIntosh of Haringey: My Lords, perhaps I may start by saying how much I agree with the noble Lord, Lord Howell of Guildford, when he said that it was necessary and appropriate that we should debate this matter again after the weekend of 1st to 3rd May. As he rightly said, our debate on the previous occasion was in anticipation of the great events that then took place. We are now not only past that date, but I would have hoped, and I still do hope, that we are past some of the more hysterical reactions which took place immediately after that weekend on the decisions that were then taken.

There is no doubt that they were important decisions. Since our previous debate heads of state or government have agreed that 11 member states: Belgium, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Spain and Finland, will participate in EMU on 1st January 1999.

In line with the information that we gave to Parliament before the Special Council, the United Kingdom voted in favour of the participation of each of those 11. Some noble Lords before and since have expressed concern about the participation of some of those countries. In particular, I recall a debate initiated by the noble Lord, Lord Chesham, about the participation of Italy.

But we supported the Commission recommendation. We did so because all of the 11 countries joining the euro have been confirmed by the Commission and by the European Monetary Institute reports as having made substantial progress towards economic convergence on the basis of the treaty criteria.

I repeat the point that I made before that what they and we were looking for was not spot convergence at any single date but convergence over a period of time. Of course, there were elements in which spot convergence did not occur. There were examples in Italy, Belgium and other countries in which the formal requirement at a particular point in time, if you stopped the clock at that time, would not have been compliant. But the important point has always been, and was recognised by the Commission and the European Monetary Institute to be, that the direction of progress in all cases was the right direction. That is confirmed by the framework for fiscal discipline which is provided by the stability and growth pact.

The high debt countries--and of course there have been high debt countries--have been reducing their debt to GDP ratios in recent years and are committed to reducing them in the future.

The declaration agreed on 1st May reaffirmed the commitment to fiscal discipline, economic reform and job creation--vital ingredients to the success of Economic and Monetary Union.

The decision on 2nd May on participation in the single currency was a historic decision carefully prepared and in line with market expectations. It removed any remaining uncertainty as to the start date of, or participation in, the single currency.

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I said that it was appropriate that we should be having this debate at an interval after those decisions took place because what was conspicuous about the immediate reaction was how wrong it was in emphasis and, indeed, in the conclusions reached. In particular I want to refer to the excessive emphasis which was given to the issue of the presidency of the European Central Bank. The heads of state or government reached agreement on the appointment of Wim Duisenberg as the first President of the European Central Bank. He indicated that he would not wish to serve a full term. The heads of state or government agreed that he would be succeeded by a Frenchman. M. Chirac indicated that his nomination would be M. Trichet, Governor of the Banque de France and no head of state or government found any difficulty with that suggestion.

It has been suggested in debate this afternoon that because Mr. Duisenberg has not been precise about the day that he will wish to retire--indeed, he has indicated that there may be considerations affecting his retirement date which are not yet known--somehow that is a breach of the Maastricht Treaty. It is now being suggested that he is likely to stay on for the full eight years. Noble Lords cannot have it both ways. Either they are making the swingeing attack on the breach of the Maastricht Treaty which my noble friend Lord Bruce of Donington made or they are saying that the Maastricht Treaty is going to be observed and somehow that is a terrible thing as well. I do not know which side noble Lords will take when they come down on this interesting but not fundamental issue. All I can say is that they cannot have it both ways.

I shall not go into the other, perhaps much more important, decisions that were taken about the membership of the executive board, the vice-presidency and the varying terms of office of the remaining members of the board. But all I can say is that it is going ahead entirely as planned. When the European Parliament gives its decision tomorrow--because it held its hearings up to the end of last week and will vote on its opinion tomorrow--heads of state or government will agree the formal appointments by written procedure and the European Central Bank will be formally constituted and able to proceed with its preparations for 1st January 1999.

Anybody reading the press coverage, particularly on the Sunday and Monday of the first weekend in May, would think that a disaster had happened. Because a debate took 12 hours longer to conclude than was intended, it was the process that commentators in the press appeared to think to be important. They seemed to ignore the fact that agreement was reached, a strong executive board will be in place and that the European Central Bank will proceed as planned. The judgment of the press at that time, and particularly of opposition politicians at that time, was shown to be faulty by the reaction of the markets.

It was anticipated from the outset by all of these people in their immediate reactions, including the Leader of the Opposition, that when the markets opened on the Monday they would show their disapproval of the whole procedure and their belief that the Economic

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and Monetary Union had somehow been stillborn or born in some deformed way. The markets totally disproved that. The reaction of the markets shows that the decision was the right one. Their reaction shows that there is a strong executive board at the start of the single currency and it increases the likelihood that EMU will succeed. And we want it to succeed. We have always made clear that we want it to succeed. If the economic benefits of membership are clear and unambiguous, we want Britain to participate in it and to participate therefore in that success.

There are many potential benefits: for instance, an improved single market; greater transparency; greater competitiveness; reduced transaction costs; greater opportunities for trade and investment; and many advantages which we will see only when we do not have them and the other 11 countries do.

Noble Lords, as is their right, have highlighted uncertainties. The Government have always said that for the full benefits of EMU to be realised, the economic reform of labour, transport and capital markets must continue. That is why we are pursuing our agenda of economic reform at home and during our presidency of the European Union.

A consensus behind the need for economic reform is building. I refer noble Lords to the declaration agreed by the Council of Economic and Finance Ministers (ECOFIN) on 1st May. That declaration goes well beyond re-emphasising the importance of sound public finances. It reaffirms the commitment of member states to economic reform and job creation. Member states committed themselves to producing reports on their products and capital markets as well as their labour markets. That pushes economic reform up the EU agenda. It increases the likelihood that the full benefit of EMU will be realised. This Government will be seeking further progress before the Cardiff European Council.

Many of the issues we are discussing will come into effect before or after--whether or not--Britain joins the economic and monetary union. The noble Lord, Lord Howell of Guildford, in what I dare to say was an extremely thoughtful and impressive speech, spoke of the existence of a parallel currency. It is called by the nastier term "Eurocreep", and I am glad that he avoided using it. Of course, that will come into effect in the period before we join. When the Chancellor made his speech on European monetary union at the end of last year, we were right to emphasise the preparations that we are making for the single currency. We are making them because they have to be made, irrespective of whether and when we join.

I turn to the amendment. I have no objection to the noble Lord, Lord Mackay of Ardbrecknish, leaping on to paragraph 40 of the 5th Report of the House of Commons Select Committee on the Treasury. It is entirely legitimate to do so. He was too kind to me when in the previous debate he said that I did not respond to the report because the Government had not made their formal response. I did not respond because he had read the report and I had not. I had been on the Bench the whole time the Treasury report had been available and no one had given me an advance copy.

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Perhaps I may remind the noble Lord about the status of the report and the committee. The committee includes as its chairman Giles Radice, who is high up in the European movement. It also includes Sir Teddy Taylor, whose views are pretty well known and who left the official Parliamentary Conservative Party for some time. Therefore, it is hardly likely that the committee will go out on a limb. Indeed, it states explicitly in paragraph 6 of its report that members of the committee have differing views as to the intrinsic merits of EMU and that it therefore decided it would be unproductive to attempt to reach a view as to whether the UK should or should not participate in stage 3.

Indeed, the committee scrutinised the framework for making the decision which the Chancellor set out. In paragraph 40, which the noble Lord, Lord Mackay, quoted, it stated that it would not be possible for there to be a final report giving all the answers to all the problems. The committee acknowledged that history would not stop at the date of some "final report".

The noble Lord, Lord Mackay, fell into that trap. He is proposing that history should stop on 1st May 2003. I looked up 1st May 2003 in the hope that it would be a Sunday. Unfortunately, it is a Thursday, so he gets away with that on a technicality. But the idea of a single date five years away is a total nonsense. That is revealed by the fact that until yesterday the noble Lord's amendment related only to measures to be adopted or decisions to be taken. It was only yesterday that he and his colleagues woke up to the fact that some measures might already have been adopted and decisions taken. They wrote that into the amendment.

We do not need reports of that kind, not because the date is silly--although it is--but because it is inconceivable that the issues set out in the amendment will not have been reported to Parliament on many occasions between now and 1st May 2003. I do not know what measures and decisions might be on the table at that date, but I know that any there are will have been subject to the normal scrutiny procedures of this Parliament. Those procedures were repeated for the record by my noble friend Lady Symons only two hours ago.

We are committed much further than that. When the Government decide that we have the measure of stable convergence that is necessary to begin the process of entry to the European economic and monetary union, at that stage we will be committed to the triple lock; the Cabinet will make a decision; Parliament will make a decision and the people of this country will make a decision in a referendum. Even if EMU were not to be debated between now and then at a fundamental as well as at an occasional level, it is inconceivable that we would go to the people of this country without a full report covering at least all the points set out in the amendment.

6.30 p.m.

Baroness Nicholson of Winterbourne: My Lords, before the Minister sits down, will he assure the House that despite its insistence on regular reporting to your

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Lordships' Chamber this amendment will not be brought out again on Thursday and an unlimited tranche of time given to this debate once more?

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