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Euro

Volume 407: debated on Friday 20 June 2003

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To ask the Chancellor of the Exchequer what representations were received from Ministers in Departments other than the Treasury on the document, "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" (HM Treasury, Cm 5776), prior to its publication; and whether these were taken into account in the final draft of the document. [120329]

The assessment of the five economic tests was produced by the Treasury for the Government. The work on the assessment was undertaken by the Treasury, and it was then circulated to the Cabinet on 29 May 2003.

To ask the Chancellor of the Exchequer (1) what estimate he has made of the length of time required, following structural reform in housing markets and other areas, before sustainable and durable convergence in relation to membership of the single currency can be judged to have occurred; [120330](2) what estimate has been made of the time required for the dynamic changes to come through before business cycles can be judged to have converged in relation to reforms to the housing market as set out in the Executive Summary of the document "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" (HM Treasury, Cm 5776) [120343]

In his statement to Parliament on 9 June 2003, the Chancellor of the Exchequer announced major reforms, right for the British economy, reforms which will be implemented over the next year and will greatly assist the process of achieving sustainable and durable convergence and the flexibility necessary for Britain to succeed sustainably within the euro zone and realise its potential for trade and investment.

To ask the Chancellor of the Exchequer (1) if he will set out the analysis behind his conclusion in "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" (HM Treasury, Cm 5776, paragraph 5.19), that over the long term, 2.5 per cent. for RPIX inflation corresponds to around 2 per cent. for HICP inflation; [120336](2) what assessment he has made of the advantages and disadvantages of including housing depreciation as a component of the inflation target; [120337](3) pursuant to his oral statement of 9 June 2003,

Official Report, column 412W, if he will publish the supporting papers for his conclusion that the HICP measure of inflation is a better measure; [120340]

(4) pursuant to his oral statement of 9 June 2003, Official Report, column 412, if he will make a statement on the perceived advantages and disadvantages of the various measures of inflation, in light of his conclusion that the HICP measure of inflation is a better measure. [120328]

In his statement on 9 June 2003, the Chancellor said that the advantage of the internationally recognised index of consumer prices—HICP—is that it is a better measure, will improve the quality of our target, is in line with best international practice and is used by every other G7 nation but Japan, and by our neighbours in Europe. The Chancellor also said that, subject to confirmation at the time of the Pre-Budget Report, he intended to change the inflation target at that time.

To ask the Chancellor of the Exchequer when officials from his Department first had discussions regarding the planning of events to promote the UK's entry to a single currency after 9 June 2003. [120025]

Ministers will be holding a series of meetings around the country, campaigning for a pro-European consensus.The arrangements for any events taking place following the announcement on EMU will adhere strictly to the published Ministerial Code. The Code governs the boundary between the legitimate presentation of Government policy, for which Government resources can be used, and party political activities, for which they cannot.

To ask the Chancellor of the Exchequer (1) if the expenditure on the promotion of UK entry to the European single currency will come from the budget of his Department; [120027](2) if he will list the projected costs of

(a) events and (b) publications planned by his Department to promote UK entry to the European single currency. [120029]

The arrangements for any events taking place following the announcement on EMU will adhere strictly to the published Ministerial Code. The Code governs the boundary between the legitimate presentation of Government policy, for which Government resources can be used, and party political activities, for which they cannot.

To ask the Chancellor of the Exchequer what discussions officials from his Department have had with representatives of Britain in Europe regarding a campaign to promote UK entry to the European single currency. [120028]

As the Chancellor said at the press conference on 10 June 2003,

"Tomorrow I'll be meeting Britain in Europe and discuss with them the changes we need in Britain and in Europe."

To ask the Chancellor of the Exchequer if he will make a statement on the programme of events planned by his Department to promote UK entry to the European single currency. [120030]

Ministers will be holding a series of meetings around the country, campaigning for a pro-European consensus.

To ask the Chancellor of the Exchequer what further work is being undertaken on the role of discretionary fiscal policy inside EMU, further to paragraph 2.215 of "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" (HM Treasury, Cm 5776); and when this work will be completed. [120334]

The Treasury will conduct further analysis into these issues to ensure that the policy proposals deliver effective counter-cyclical stabilisation of the economy if the UK were to join EMU.

To ask the Chancellor of the Exchequer what further work is being undertaken on the role of automatic fiscal stabilisers inside EMU, further to paragraph 2.196 of UK Membership of the Single Currency: An Assessment of the Five Economic Tests (HM Treasury, Cm 5776); and when this work will be completed. [120335]

Paragraph 5.32 of the Treasury discussion paper "Fiscal stabilisation and EMU" describes what further work will be required over time to assess the case for strengthening the automatic stabilisers if the UK were to join EMU.

To ask the Chancellor of the Exchequer what representations he has received on his proposal to change the inflation target. [120338]

The Chancellor has received a number of representations from Members of Parliament on behalf of their constituents seeking confirmation that pensions will continue to be increased in line with the RPI. In his statement on 9 June the Chancellor confirmed that pensions and benefits and index-linked gilts would be calculated on exactly the same basis as now.

To ask the Chancellor of the Exchequer what analysis he has made of the performance of the existing inflation target and its effect on the conduct and performance of UK monetary policy since 1997. [120339]

The Treasury published a paper in October 1999, "The New Monetary Policy Framework", which assessed the performance of the new framework in its first two years. This analysis was updated in the book "Reforming Britain's Economic and Financial Policy—Towards Greater Economic Stability", HM Treasury, published in 2002. In addition, the Government publishes regular commentary on, and analysis of, the performance of inflation and inflation expectations under the new monetary policy framework in Budget and Pre-Budget Reports. The analysis demonstrates that the new monetary policy framework has made a difference, in particular in closing the credibility gap between inflation expectations and the inflation target.

To ask the Chancellor of the Exchequer pursuant to his oral statement of 9 June 2003, Official Report, column 412W, if he will make a statement on the consultation process on the new fiscal rule. [120333]

The Treasury discussion paper "Fiscal stabilisation and EMU" discusses how the new fiscal rule could be set up if the UK were to join EMU. In his statement to Parliament on 9 June 2003, the Chancellor of the Exchequer said, "to ensure stability inside the euro area we will consult on the case for an open letter system on fiscal policy and a new and additional fiscal rule." We intend to discuss the new fiscal rule with external experts. Given that decisions on how such consultation will be carried out have not yet been made, the draft answer quotes from the statement that "we will report on progress in the Budget next year"

To ask the Chancellor of the Exchequer what conclusions he draws from the UK's correlation of business cycle to the euro area compared to Germany's as shown in Table 1.1 of "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" (HM Treasury, Cm 5776). [120341]

I refer the hon. Member to paragraph 1.166 of "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" which states:"On past performance, UK business cycles have been much less compatible with the euro area average than has been the case in other countries such as Germany and France. There is some evidence that compatibility may have increased in recent years, reflecting greater macroeconomic stability in the UK and increased convergence between the business cycles of all the advanced economies. Over the last five years, the UK output gap cycle has been more correlated with the German cycle than that in the US…"

To ask the Chancellor of the Exchequer pursuant to "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" HM Treasury, Cm 5776, paragraph 1.121, what conclusions he has drawn from his finding that the United Kingdom left the ERM at least in part because of a lack of convergence. [120342]

As the Chancellor said in his statement to the House on 9 June 2003,

"The discipline of the five tests is to ensure there will be no repeat of the experience of the ERM when Britain joined at the wrong rate and at the wrong time without either convergence or flexibility and the potential benefits could not be realised."
The Government believe there is a realistic prospect of making significant progress on this reform agenda over the next year. We will report on progress in the Budget next year.

To ask the Chancellor of the Exchequer if he will make a further statement on his assessment of the effect of EMU membership on pensioners, and in particular his conclusion in "UK Membership of the Single Currency: An Assessment of the Five Economic Tests", HM Treasury, Cm 5776, paragraph 5.139 that overall the environment would be one of greater uncertainty. [120344]

As the Chancellor said in his statement,"we will do nothing to put stability and the national economic interest at risk."

To ask the Chancellor of the Exchequer whether officials from Departments other than the Treasury contributed to the final contents of the document "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" (HM Treasury, Cm 5776). [120346]

This is a Treasury assessment produced for the Government. The work was undertaken by the Treasury.

To ask the Chancellor of the Exchequer when the final changes were made to the document "UK Membership of the Single Currency: An Assessment of the Five Economic Tests" (HM Treasury, Cm 5776). [120347]

The assessment of the five economic tests was produced by the Treasury for the Government. The work on the assessment was undertaken by the Treasury, and it was then circulated to the Cabinet on 29 May 2003.

To ask the Chancellor of the Exchequer whether officials from departments other than the Treasury contributed to the final contents of the 18 EMU studies accompanying the Treasury's assessment of the five economic tests, published on 9 June. [120349]

As stated in the EMU study "EMU and business sectors""This study has benefited from comments and analytical inputs from Department of Trade and Industry officials.… All content, conclusions, errors and omissions in this study are, however, the responsibility of HM Treasury alone."

To ask the Chancellor of the Exchequer whether ministers in (a) the Treasury and (b) other Departments made a contribution to the final contents of the 18 EMU studies which accompanied the Treasury's assessment of the five economic tests, published on 9 June. [120350]

The EMU studies are Treasury studies, and the work was completed by Treasury officials and, in some cases by external authors with specialist expertise.One EMU study, "EMU and business sectors""… benefited from comments and analytical inputs from Department of Trade and Industry officials.…. All content, conclusions, errors and omissions in this study are, however, the responsibility of HM Treasury alone".The EMU studies were then circulated to Cabinet on 17 May 2003.