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Lord Wallace of Saltaire: My Lords, I was quoting from the minutes of the tourism summit of 1st March 2000 which the Library kindly provided for me. One of the points made is that for every 1 per cent increase in prices the level of tourism is thought to go down by 1.5 per cent. As a very limited economist, that seems to me to be a good definition of price elasticity.

Lord McIntosh of Haringey: My Lords, I am grateful for that definition and I am grateful for the source of the definition, which I should have read and had not noticed. What that means--I acknowledge the

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truth of what the noble Lord, Lord Wallace, says--is that at that level of price elasticity we have to be particularly cautious about additional unnecessary costs which, as the noble Lord, Lord Harrison, said, could be imposed on us by any failure to adapt to the existence of the euro, whether or not we adopt it.

I have never thought that the transaction costs are a prime reason for British entry into the euro-zone. The issue of competition and many other issues are more important than transaction costs, but there is no doubt that they are particularly important in the tourism industry. I rather doubt whether preparations in the 11 euro-zone countries are advancing as fast as the governments of those countries would wish. I have been in France, Spain and Portugal in the past three months. Other than the fact that by law price tickets must be declared in euros, I have never heard anyone mention a euro at any time. Although I am pleased to have a euro chequebook, I use it only to pay my bills rather than to pay for things on a day-to-day basis. I think that there will be quite a considerable shock in the euro-zone, let alone in this country, when we come to the very last days of December 2001. If we overestimate the speed at which they will adapt, we may cause ourselves too great concern about the extent to which the euro will be demanded in this country before that time.

However, UK tourism businesses need to ask themselves whether that means that their customers may find travel in the euro-zone more attractive. That will happen even without the adoption of the euro. It will happen simply because of the fixed rates of exchange. Some parts of our tourism industry may say that there will be little or no impact. That is fine. But they will need to develop the ability to deal in euros, just as many of them have already developed the ability to deal in dollars in order to maintain and expand their markets. The point for the tourism industry is that if a tourism business is to succeed, it has, just as with any other business, constantly to meet and exceed its customers' needs and expectations. If its customers want to pay in euros, it risks losing them if it cannot accept those euros.

Let us briefly consider the practicalities. Credit cards can be used anywhere, in any currency, and the entry simply appears on a bank statement on one's return. But if people coming to this country want certainty, I can see the difficulty about declaring in a tourist brochure in advance what the equivalent in euros to pounds may be. But surely we could very soon be in the position to say, when someone arrives at a hotel, that the price for a night's stay will be £60 or 95 euros; it will appear on a display board in the hotel and will be the basis on which, in 2002, the tourist can pay in his own home currency, in cash if he wants to do so. The same will be true of shops and restaurants. There is no reason why we should not adapt in that way. Even though I do not think that anything very much has happened on the ground, and no one is

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thinking very much in terms of euros. Next year French civil servants, for example, will start to be paid in euros and will want to start to use the currency.

Like all business changes, the introduction of the euro presents threats and opportunities. For businesses that are customer-focused there will be opportunities; those that fail to take the consequences will lose out. We have been active in making sure that businesses understand what the introduction of the euro means. We have produced and distributed factsheets on a range of strategic and technical issues. The forums we have set up in each English region and in Wales, Scotland and Northern Ireland bring together all those organisations that are interested in business support. Advisers from the euro preparations unit in the Treasury are frequent speakers at conference events. We have produced a series of case studies setting out how real businesses are meeting the challenges presented by the introduction of the euro, on the basis that I find to be sound: that people are much more likely to believe what other businesses say than they are to believe government lecturing on the subject. We shall soon be publishing case study material on the tourism industry--small firms that are typical of the sector: a small hotel chain, a bed-and-breakfast in Wales, a shop selling tourist souvenirs.

To answer my noble friend Lord Lea directly, we have set up the Euro Preparatory Working Group, co-ordinated by the Department for Culture, Media and Sport, working closely with the industry, seeking to raise awareness of the impact of the euro on tourism businesses and to disseminate information to the industry. The British Tourist Authority is working closely with that group and the national tourist boards produced a guide to assist small tourism-related businesses to prepare for the introduction of the euro last year.

A number of noble Lords, notably the noble Lord, Lord Gordon, and the noble Viscount, Lord Brookeborough, talked about the need to tackle the taxation of hotels. We have debated the matter at length in this House in recent months. I have pointed out that the balance of taxation benefiting tourism in this country is very much greater than would appear from the fact that we have taxation on hotels. The fact that we do not have VAT on public transport, food and children's clothing very much outweighs the cost of taxation on hotels. I gave the figures and am happy to send a copy of Hansard to anyone who doubts them.

We have run out of time. If I have missed any points to which I ought to have responded, I shall gladly write to noble Lords. I hope that I have convinced those who have taken part in this valuable debate that the Government do not in any way under-value the importance of the tourist industry or the importance to the industry of adapting to the existence of the euro, whether or not the United Kingdom adopts the euro.

        House adjourned at four minutes past eight o'clock.

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