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Lord Harrison: My Lords, would the noble Lord care to take a bet on that--perhaps in euros?
Lord Mackay of Ardbrecknish: My Lords, the noble Lord should check the number of countries where the dollar is considered to be equal to the local currency. Frankly, I suspect that the American tourist in Europe will often be told the price of things in dollars. The reality is that the dollar is the major world currency, and will remain so. It is a very poor argument in favour of the euro to suggest that it may replace the dollar. There are many other arguments for the euro, but that one is a total non-runner.
I shall not get into the territory of suggesting that the noble Lord was offering the euro as a quick solution to the Northern Ireland problem, but his speech began to get a bit like that and I wrote down a note to say so.
The subject of Ireland brings me to the noble Lord, Lord Lea. He was answered--as I would expect him to be--by the very thoughtful speech of the noble Lord, Lord Gordon of Strathblane. He made a much more balanced speech about the problems of the euro for this country than either of his two noble friends. Ireland may look very good at the moment but, frankly, if it does not do something about its 4.6 per cent inflation, the advantages--if they are there--will rapidly disappear and it will not be able to do anything about it in the traditional way. It has no control over its own bank rate. It will be interesting to watch how the government in Ireland react over the next few months to the problems of a severely over-heating economy and increasing inflation rate when they do not have control over the traditional mechanisms for dealing with them. Inflation at 4.6 per cent will rapidly remove any competitive advantage that the current euro/pound rate gives. We have to be careful when looking at that.
The noble Lord, Lord Lea, suggested that the euro/pound link had something to do with the fact that more people from this country went to France than French people came here. The simple fact is that the French holiday in France, by and large; they are not very good at going to other countries. I cannot say that I blame them for that. They seem to prefer to holiday in France. Most people steer clear of France in August because all the French are holidaying there. They are very nationalistic from that point of view. I know that the noble Lord, Lord Wallace, thinks that is a dreadful thing when it comes to being British; he dismisses everything that is British, as we heard again this evening. The French do not take that view at all; they are very patriotic. Good luck to them and more power to their elbow when it comes to resisting some of the silliness that comes out of Brussels. I see that some of the splendid street markets in France are about to be abolished by rules from Brussels. That will make France a bit less French and it may not do its tourist industry a lot of good.
No one needed to get up early this morning to realise that the value of the pound against the euro--and therefore against the currencies of other euro-zone countries--is at such a high level that it will affect the tourist industry adversely, just as it affects manufacturing business adversely. The noble Lord, Lord Paul, said on television at the weekend how damaging the pound/euro rate was to manufacturing industry. We all know that that is one of the reasons why BMW, with all its skills and resources, has found it impossible to turn Rover round.
Of course the tourist industry is important, as a number of noble Lords have mentioned. It creates perhaps up to 2 million jobs. In many parts of Britain it is the major employer. We do not mention these matters often, but when I was a Member of another place the constituency I represented was heavily dependent on tourism. I suspect that it was perhaps its major industry. It was not big businesses--although there were one or two of them--which made up this very important industry, but, by and large, lots and lots of very small businesses.
I suspect that the corporate sector is pretty robust and will not be much affected by exchange rates. It is used to exchange rates and working within them. If those within it want to go to a grand conference in Britain, they will go to Britain; if they want to go to Barbados, they will certainly go there. Noble Lords will understand the different attractions. So I do not think that the corporate sector will be greatly affected.
However, as regards the domestic sector, where we British go on holiday will be affected by the value of the pound. It is undoubtedly much more attractive to go to Spain or to any of the countries in the euro-zone because of the exchange rate. Many British people go to America--where the currency has not fluctuated much in many years--for the simple reason that they want to go to the United States on holiday. People will certainly find it more attractive to holiday abroad, which will of course have an effect on the domestic market--although, as the noble Lord, Lord Gordon of Strathblane pointed out, if their foreign holiday is a
bit cheaper than it might otherwise have been they might have some money left over for a two or three-day break in this country. I have no doubt that the various bodies which advertise holidays in Britain will look at that market and try to target it.The other side of the issue concerns the overseas tourists who come to Britain. It stands to reason--I think it was Just William who devised that phrase to explain things--that if the value of our currency is high, as it is, people from abroad--the European part of abroad, of course-- will find it more expensive to come to this country than to go to other parts of the European Union. But they will also find it quite expensive to go to the United States or to other parts of the world because the euro is very weak against a lot more currencies than the pound only.
It may well be worth asking--but not tonight--why the euro is so weak. It is a serious problem for the euro that it continues to decline. I did not think it would ever reach the level it has reached now, but who can forecast how much lower it will go? That is quite a serious matter for the currency. I saw last week that some of the economic advisers to the German Government are having second thoughts about the exchange they have made of a strong mark for a weak euro.
There is already evidence of a fall in the number of tourists coming from southern Europe to Britain--one noble Lord mentioned that--and it is beginning to show in those coming from northern Europe. But I do not think anyone has offered any solution--apart from the noble Lord, Lord Harrison, who maybe thinks that we should join the euro immediately. I do not know whether or not that was his solution, but we have been very thin on the ground for solutions to this problem. Perhaps the only one is to tell our European friends that they should start getting their act together and improve the relative position of the euro.
Tourism is an import/export business, so to speak, and when I looked at the statistics for the past few years I noticed that in 1995 the balance of payments was £3.5 billion in deficit--in other words, we spent more abroad than we earned from abroad--and that in 1996 the figure was just under £4 billion; in 1998 it had reached almost £7 billion; in the first eight months of 1999 it stood at £5.6 billion. These figures were given by Janet Anderson in the other place on 25th October; perhaps the Minister will be able to tell the House what were the year-end figures for 1999. On my calculation, they must have been something like £9 billion--I do not know--by the end of the year if they were £5.6 billion for eight months. I accept that the tail-end of the year is not a vigorous time for tourism here, but I suspect it may be a vigorous time for people deserting this country to look for a bit of sun. I suspect that things would have got worse as the year advanced and as the position of sterling improved so far as British tourists going overseas were concerned.
It would be very interesting to know whether one of the effects of a Labour government is that the balance of payments for tourism has gone badly against us and
perhaps more than doubled in the past four or five years. I almost promised myself not to make any political points, but I cannot resist that one.It has been an interesting debate. Just as manufacturing is important, tourism is an important industry. In fact, manufacturing is more important because if we do not have a manufacturing industry--whether it be old-fashioned manufacturing or new manufacturing and computer technology and so on--people will not have the wealth with which to go on holiday. In my view, the manufacturing industry is perhaps more important because without it we will not have the wherewithal to have tourism at all.
In both those industries, the position of the euro against the pound is serious. I have not heard a solution to this problem. Frankly, I do not believe that there is an easy solution, because, as the noble Lord, Lord Gordon of Strathblane, explained, the market determines the rates of currencies, not, I regret to say, Chancellors, not, I regret to say, the Monetary Policy Committee of the Bank of England, and not even the European Central Bank.
7.50 p.m.
Lord McIntosh of Haringey: My Lords, in expressing my gratitude to my noble friend Lord Harrison for introducing the debate, I base my gratitude on the quality of the speeches made in the debate. I am particularly pleased that he flushed out the noble Lord, Lord Mackay of Ardbrecknish, who seems to have set himself a target of following me around. If in the future he intends to make from the Dispatch Box after-dinner speeches like that one, I shall be even more grateful to him. It is the one kind of speech that I am totally terrified of making myself. The noble Lord, Lord Mackay, can make after-dinner speeches at any time of the day or night. I cannot make them after dinner, not even when I have had enough drinks to make it possible. I listened to the noble Lord with great envy and great admiration. I was very glad that he resisted almost to the very end the temptation to allow politics to enter his speech.
The subject of the Question is whether the introduction of the euro will be good for the British tourism industry, regardless of whether the United Kingdom adopts the euro. That is the theme which I propose to take for my speech. In other words, I shall not talk about the strong pound, because that is not an issue in whether or not we adopt the euro. The Chancellor and the Prime Minister have made very clear the economic conditions for our adoption of the euro. I shall not talk about the timing of entry. I shall certainly not follow the noble Lord, Lord Lea, in his suggestion that we should declare an entry rate or a range of entry rates now. As he well knows, that should be the result of whether or not we achieved the economic conditions for entry, not the determinant of them. Perhaps I shall not make a political speech either. I shall certainly not make the wider political speech which some speakers would have wished me to
make. But I am going to talk about tourism. I am going to talk about what the Government intend to do, because that is what I was asked to do in the Question.I want to confirm what all speakers have said, that tourism is an important industry for the United Kingdom. It employs 1.8 million people, which represents 7 per cent of all employment in this country. Perhaps I may say to the noble Lord, Lord Gordon, who made similar comparisons, that it is larger than construction or transport. Although the final figures are not in--I cannot give the noble Lord, Lord Mackay, the final figures on the balance of payments in tourism for the end of last year--we estimate that more than 25.5 million overseas visitors spent over £12.6 billion in the UK last year. Total tourism expenditure in the United Kingdom in 1999 is thought to be in excess of £63 billion. As the noble Lord, Lord Wallace, said, the UK currently ranks fifth in the world in terms of earnings from visitors. The good news is that the provisional figures for the two months of 2,000 already show increases in both overseas visitor numbers and in the amount of money that they are spending. I hope that that will encourage the noble Lord, Lord Lea, who feared that the strong pound had already resulted in a reduction of visitor numbers, although he took some comfort from the existence of and the increase in the numbers of low fares.
Visitors from European countries which make up the euro-zone are important customers of our tourism industry. The British Tourist Authority reports that in 1998, which is the last year for which figures are available, we received 14 million visitors from the euro-zone and they spent £4.3 billion. As the noble Lord, Lord Wallace, said, that represents two-thirds of the visitors and roughly half of the expenditure. But we do not need only facts and figures to tell us that tourism is important. In this part of London, except yesterday, one has only to listen to the languages spoken outside the House to recognise the importance of tourism to this country.
However, we cannot rest on our laurels. Tourism is an intensely competitive industry. All of our tourist establishments, whether guest houses, hotels, museums or visitor attractions, are bound to be in competition with those in Germany, France or other countries. I am not sure that I understand what the noble Lord, Lord Wallace, was saying about tourism being price elastic. It is not easy to make direct comparisons of price between this country and other countries when standards are so difficult to achieve.
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