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Lord Mackay of Ardbrecknish: I gather that there are now some new procedures in the House of Commons which are somewhat like those in subsection (1)(b), but the fact is that they are not used in every Bill. As I said earlier, I suspect that, as in this House, they are used by and large on Bills of no political controversy. It is the Bills of political controversy that most need good scrutiny and good provision.

However, as I indicated, for the moment I beg leave to withdraw the amendment, but I hope that the Government will reflect on their argument and will consider withdrawing Clause 34.

Amendment, by leave, withdrawn.

[Amendment No. 249 not moved.]

7.16 p.m.

On Question, Whether Clause 34 shall stand part of the Bill?

Their Lordships divided: Contents, 99; Not-Contents, 83.

Division No. 2


Allenby of Megiddo, V.
Alli, L.
Amos, B.
Ampthill, L.
Archer of Sandwell, L.
Ashley of Stoke, L.
Bach, L.
Barnett, L.
Bassam of Brighton, L.
Berkeley, L.
Blackstone, B.
Blyth, L.
Borrie, L.
Brooks of Tremorfa, L.
Burlison, L.
Carter, L. [Teller.]
Castle of Blackburn, B.
David, B.
Davies of Coity, L.
Davies of Oldham, L.
Dean of Beswick, L.
Dean of Thornton-le-Fylde, B.
Desai, L.
Dixon, L.
Donoughue, L.
Dormand of Easington, L.
Dubs, L.
Eatwell, L.
Evans of Parkside, L.
Falconer of Thoroton, L.
Farrington of Ribbleton, B.
Gallacher, L.
Gilbert, L.
Gordon of Strathblane, L.
Goudie, B.
Gould of Potternewton, B.
Graham of Edmonton, L.
Grantchester, L.
Gregson, L.
Grenfell, L.
Hardie, L.
Hardy of Wath, L.
Haskel, L.
Hogg of Cumbernauld, L.
Howie of Troon, L.
Hoyle, L. [Teller.]
Hughes, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L. [Lord Chancellor.]
Islwyn, L.
Janner of Braunstone, L.
Jay of Paddington, B.
Jeger, B.
Judd, L.
Kennedy of The Shaws, B.
Kirkhill, L.
Levy, L.
Lockwood, B.
Lofthouse of Pontefract, L.
McIntosh of Haringey, L.
Mackenzie of Framwellgate, L.
Mallalieu, B.
Merlyn-Rees, L.
Milner of Leeds, L.
Monkswell, L.
Montague of Oxford, L.
Morris of Manchester, L.
Nicol, B.
Orme, L.
Pitkeathley, B.
Ponsonby of Shulbrede, L.
Puttnam, L.
Ramsay of Cartvale, B.
Randall of St. Budeaux, L.
Rea, L.
Rendell of Babergh, B.
St. John of Bletso, L.
Sefton of Garston, L.
Sewel, L.
Shore of Stepney, L.
Simon, V.
Simon of Highbury, L.
Simpson of Dunkeld, L.
Smith of Gilmorehill, B.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Strabolgi, L.
Symons of Vernham Dean, B.
Taylor of Gryfe, L.
Thomas of Macclesfield, L.
Thornton, B.
Turner of Camden, B.
Uddin, B.
Varley, L.
Walker of Doncaster, L.
Watson of Invergowrie, L.
Whitty, L.
Williams of Mostyn, L.
Young of Old Scone, B.


Aldenham, L.
Aldington, L.
Alexander of Tunis, E.
Astor, V.
Balfour, E.
Blatch, B.
Brabazon of Tara, L.
Brentford, V.
Cadman, L.
Calverley, L.
Carlisle, E.
Carlisle of Bucklow, L.
Carnegy of Lour, B.
Chesham, L.
Clement-Jones, L.
Coleraine, L.
Colwyn, L.
Cope of Berkeley, L.
Darcy de Knayth, B.
Dartmouth, E.
Denham, L.
Dholakia, L.
Dixon-Smith, L.
Dundonald, E.
Effingham, E.
Ellenborough, L.
Fraser of Carmyllie, L.
Glasgow, E.
Gray of Contin, L.
Hamilton of Dalzell, L.
Hampton, L.
Hamwee, B.
Hooson, L.
Howell of Guildford, L.
Hunt of Wirral, L.
Hylton, L.
Jopling, L.
Kingsland, L.
Kintore, E.
Lang of Monkton, L.
Lawrence, L.
Linklater of Butterstone, B.
Ludford, B.
Lyell, L.
Mackay of Ardbrecknish, L.
Mackay of Drumadoon, L.
Mackie of Benshie, L.
Mar and Kellie, E. [Teller.]
Massereene and Ferrard, V.
Minto, E.
Montrose, D.
Mountevans, L.
Mowbray and Stourton, L.
Munster, E.
Napier and Ettrick, L.
Newby, L.
Nicholson of Winterbourne, B.
Park of Monmouth, B.
Pilkington of Oxenford, L.
Rankeillour, L.
Razzall, L.
Rees, L.
Renton, L.
Rodgers of Quarry Bank, L.
Rowallan, L.
Russell, E.
Ryder of Warsaw, B.
Saltoun of Abernethy, Ly.
Sanderson of Bowden, L.
Seccombe, B.
Selkirk of Douglas, L.
Sempill, L.
Steel of Aikwood, L.
Stodart of Leaston, L.
Strange, B.
Thomas of Gresford, L. [Teller.]
Thomson of Monifieth, L.
Thurso, V.
Tordoff, L.
Ullswater, V.
Weir, V.
Wilcox, B.
Wynford, L.

Resolved in the affirmative, and clause agreed to accordingly.

28 Jul 1998 : Column 1408

7.25 p.m.

Baroness Ramsay of Cartvale: I beg to move that the House do now resume and that the Committee stage begins again not before 8.25 p.m.

Moved accordingly and, on Question, Motion agreed to.

House resumed.

28 Jul 1998 : Column 1409

Royal Assent

The Deputy Speaker (Lord Chesham): My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

Landmines Act,

Private Hire Vehicles (London) Act,

Northern Ireland (Sentences) Act,

City of Edinburgh (Guided Busways) Act,

Tamar Bridge Act.

Economic and Fiscal Strategy

7.27 p.m.

Lord McIntosh of Haringey rose to move, That this House approve the Government's assessment as set out in the Economic and Fiscal Strategy Report 1998 and Comprehensive Spending Review for the purposes of Section 5 of the European Communities (Amendment) Act 1993.

The noble Lord said: My Lords, this debate is being held to satisfy Section 5 of the Maastricht Act. Parliament has to approve the government reports on economic policy that contain the information that is sent to the Commission or the Council for the purposes of Articles 103 and 104c of the Maastricht Treaty. The Act requires that Parliament approves an assessment of the medium-term economic and budgetary positions, including public investment expenditure as well as social, economic and environmental goals. These are the aspects of the Economic and Fiscal Strategy Report and the Comprehensive Spending Review upon which I will focus.

This will be the second Section 5 debate this year. After the Financial Statement and Budget Report was published, a Section 5 debate was held in the House of Lords so that we could send the information in the Budget to the Commission. However, the public finance projections are now out of date. The Economic and Fiscal Strategy Report and the Comprehensive Spending Review are a major statement on fiscal policy, setting out the Government's latest fiscal projections based on new spending plans. It is appropriate that these form the basis of submissions to the Council and the Commission. We must have Parliament's approval before we send information taken from these documents to fulfil our obligations under Articles 103 and 104c, the broad economic guidelines and excessive deficit procedure respectively.

The Economic and Fiscal Strategy Report outlined a new regime in public spending control and the Comprehensive Spending Review set out new priorities for public spending and investment. This strategy combines prudent and stable public finances with investment and reform in public services.

The Economic and Fiscal Strategy Report also helps to pave the way for the introduction of resource accounting and budgeting, which represents a landmark change in the

28 Jul 1998 : Column 1410

way that the Government undertake financial planning and reporting. The first set of resource accounts are on track to be published in 1999-2000. These will be accruals-based accounts similar to those prepared for private sector companies but with two additional features--a statement showing use of resources approved by Parliament, and a statement analysing spending by objective.

Resource accounting and budgeting will underpin the Government's golden rule by making a clear structural distinction between current and capital spending, which will no longer be treated as though they are equivalent economic categories. It will also lead to improvements in the efficiency of public spending and underpin the drive towards better stewardship of public assets so that they are used as productively as possible. Thus RAB is integral to the strategy of investment, reform and modernisation that underpins the Comprehensive Spending Review.

Within a stable fiscal and macroeconomic framework, the Government can fulfil their objectives of promoting growth and employment, enhancing opportunity and fairness, tackling social exclusion and providing an efficient and modern public sector.

The EFSR shows that public sector net borrowing is expected to fall from 1 per cent. of GDP in 1997-98 to zero in 2000-01 and net debt is projected to decline to below 40 per cent. of GDP over the Parliament. Nonetheless, net public sector investment is projected to rise from less than 1 per cent. of GDP in 1997-98 to stabilise at around 1½ per cent. of GDP per annum.

This public investment will allow the renewal and modernisation of the United Kingdom's infrastructure and public services by increasing the level of public investment within the fiscal rules. It will be used in the most cost-effective way, with departments having to set out in detail how the resources will deliver the Government's objectives, provide the best value for money, and ensure positive social returns.

The CSR and EFSR, especially the increase in public investment, show how the Government will tackle their social objectives. This investment will help the Government fulfil their manifesto commitment of reducing class sizes to 30 or less for children between five and seven. The past under-investment in council housing will be alleviated by extra investment of £3.6 billion.

In the year of its 50th birthday, the NHS is being allocated an extra £21 billion over the next three years. Spending in England will increase by an average 4.7 per cent. in real terms over this period. This will provide real improvements in services, including a reduction of 100,000 in the waiting list that we inherited.

The CSR will help us meet our environmental objectives. A doubling of resources for the revised home energy efficiency scheme, and an increase of 300 per cent. of resources for local authority public transport to tackle car congestion and pollution will help us to meet our legal obligations under the Kyoto Protocol to cut UK emissions of greenhouse gases by 12½ per cent. on 1990 levels by 2010.

28 Jul 1998 : Column 1411

Sending details about our economic policies set out in the EFSR and CSR to the Commission and the Council is not merely an obligation under the Maastricht Treaty. The Government are committed to the sharing of information. And we support this type of multilateral surveillance in different organisations such as the IMF and OECD.

Sharing information will help to promote the adoption of sound economic policies throughout the Community. Only if we play our full part in these discussions can we influence the way Europe solves its economic problems which will be particularly important at the launch of the single currency.

Our achievements during our presidency show what can be done by working closely with the other member states of the European Union. We have established a new European way for economic reform, examining how to improve labour markets, product markets and capital markets. We have begun to address the reforms necessary for successful enlargement to the east. In our presidency the single currency was successfully launched.

As your Lordships know, the Government have decided not to participate in the single currency at its launch in 1999. However, we want the single currency to be successful as we will be affected whether we participate or not. Most of our trade is with the EU, and our economic future is bound up with Europe. Sharing information will help ensure that the single currency is a success.

Approving this Motion will enable the UK to meet our treaty obligations, to provide information and to participate fully in the important process of multilateral surveillance and economic co-operation as provided for in Article 103 and 104c of the treaty. I hope that the House will support the Motion. I beg to move.

Moved, That this House approve the Government's assessment as set out in the Economic and Fiscal Strategy Report 1998 and Comprehensive Spending Review for the purposes of Section 5 of the European Communities (Amendment) Act 1993.--(Lord McIntosh of Haringey.)

7.35 p.m.

The Earl of Dartmouth: My Lords, first, I should declare an interest to the House. I have the honour to be standing for my party in my home area of Yorkshire in the Euro elections next year. Of course, I doubt whether the electors have as strong an interest in the Government's assessment as set out in the Economic and Fiscal Strategy Report 1998 and Comprehensive Spending Review for the purposes of Section 5 of the European Communities (Amendment) Act as I have. However, as the noble Lord, Lord McIntosh, has ably demonstrated, this seemingly innocuous proposal addresses some of the key issues which face our country in the years to come: namely, the Maastricht criteria; our adherence to the criteria; cycle convergence; and the possibility of our entry into the euro. These are issues of great importance for the House, for the electors of Yorkshire as well as elsewhere, and I crave the indulgence of the House to address them for a few minutes.

28 Jul 1998 : Column 1412

I should like to start from the proposition that it is a very tall order for a central bank to achieve the correct interest rate, however correctness is defined, for 11 countries with 11 differing economies. By way of illustration, Mr. Eddie George and his very able advisers at the Bank of England find it hard enough to come up with the right interest rate for only this economy in this country. Perhaps I may give your Lordships a further illustration. The reality is that the current level of interest rates in Britain is probably about right for, let us say, the housing market in SW1. But arguably--and I believe it--interest rates are much too high from the point of view of manufacturing industry in the North West, the Midlands and in Yorkshire.

The 11 countries joining the euro on day one have set themselves a massive task. I should like to make it clear--and in so doing I echo the words of the noble Lord, Lord McIntosh--that we wish them well. We want the euro to work. It is in our national interest that the euro should work. However, confidence in the eventual success of the euro is hardly helped when one observes the way in which the politicians of continental Europe have systematically evaded treaty obligations and the Maastricht criteria have been comprehensively fudged as the British president stood by. That is why the fact of this submission to the European Communities has an almost Salvador Dali surrealist quality.

I wish to make the important point, which is hardly ever made, that the British economy is different both in cycle and in structure from the continental economies. It is different in cycle precisely because it is different in structure. I do not wish to impose too much on your Lordships' patience, but perhaps I may give four lightning examples of how our economy differs in structure from the continental economies. We have a bigger services sector; we have a much bigger financial services sector; we have a housing market financed almost entirely by variable mortgages as opposed to fixed-rate mortgages; and we are an oil exporter while continental Europe is not. I could continue. Our economy significantly mirrors the economic cycle of the United States. If one had to choose a country for Britain's economic cycle to mirror, the objective choice would have to be the world's largest, most dynamic, most job-generative economy; that of the United States.

Furthermore, the current exchange rate of the pound and our interest rates, to which I alluded earlier, are much more aligned with the dollar and interest rates in the United States than with the deutschmark and the current level of interest rates in continental Europe. How bizarre, therefore, that so many of the political establishment regard it as a desirable aim in itself, needing no logical justification, for Britain's economy to converge with the stagnant, high-employment economies of continental Europe. The material problem facing the 11 countries entering the euro in phase one is not the number of currencies but the number of unemployed. That is very largely because of high taxes, high costs and unnecessary regulation.

My final and most substantive point is that in the Thatcher/Major years, Britain painfully restructured and began to become competitive in the world economy. Until and unless the 11 follow that example, whatever

28 Jul 1998 : Column 1413

the convergence may appear to be and whatever this government assessment may purport to give, it will be folly for this country to enter the euro.

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