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Emu: Outline National Changeover Plan

Volume 597: debated on Tuesday 23 February 1999

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4.36 p.m.

My Lords, with the leave of the House, I shall now repeat a Statement that has been made in another place by my right honourable friend the Prime Minister. The Statement is as follows:

"On 27th October 1997 my right honourable friend the Chancellor of the Exchequer set out the Government's policy on the European single currency. He said he would publish details of how, should it choose to do so, Britain could join the euro. This became known as the National Changeover Plan. Today we publish an outline of this plan as a basis for consultation.

"I would like to thank the Standing Committee set up by the Chancellor to oversee preparatory work on EMU across the economy. I am most grateful to the Governor of the Bank of England, the Heads of the Financial Services Authority and the British Bankers Association, the Presidents of the CBI and the British Chambers of Commerce and the General Secretary of the TUC for their contribution to this work. This has been a truly co-operative effort involving an unprecedented partnership between the public and private sectors. And I am particularly pleased that the Standing Committee welcomed our intention to produce the outline plan we are publishing today.

"Madam Speaker, in his Statement of October 1997, the Chancellor made clear the Government's view that membership of a successful euro would bring benefits to Britain in terms of jobs, investment and trade. He said that in principle the Government were in favour of Britain joining a successful single currency. And he set out the conditions necessary to satisfy our national economic interest.

"So our intention is clear. Britain should join a successful single currency, provided the economic conditions are met.

"It is conditional. It is not inevitable. Both intention and conditions are genuine.

"This is the right course for the country, to resolve this issue for the British national interest, the future of our people and their well-being. And it is that national interest that will always come first.

"I do not dismiss the constitutional or political issues. They are real. Monetary union is a big step of integration. But so was the Single European Act. And the EU itself. In finance and business the world is more and more integrated. It is moving closer together. And if joining a single currency is good for British jobs and British industry, if it enhances British influence and power, I believe it is right for Britain to overcome these constitutional and political arguments and the fears behind them. For the very reason of the sensitivity of these arguments, we have also said clearly: the Government can recommend. But the people will decide in a referendum.

"What we announce today is not a change of policy. It is a change of gear. If we wish to have the option of joining, we must prepare. The sheer nature, scale, and complexity of the arrangements require considerable time for such preparation. It is, for example, far more detailed in its consequences than decimalisation. If we do not start to face this reality now, we will simply not have the practical means necessary to make a choice.

"There are those, on the Opposition Benches and elsewhere, who oppose the very idea of a national changeover plan. I say: we can no longer afford to pretend either that the euro does not exist or that Britain should not actively prepare for it. Such a denial of reality does not promote Britain's interests; it betrays them.

"The euro is a reality. It exists. Eleven out of 15 other EU members are in it. It represents 20 per cent. of world income, as big as the US. It will be the currency of 290 million people.

"It has begun and, on the whole, it has begun well. Of course, these are early days. There will be tests and strains ahead. But the launch was successful; and those who predicted it would never happen or would launch itself in disaster, have been proven wrong.

"And it will have a major impact on Britain, in or out. That much is obvious. That alone would rebuke those who would like to pretend it is not there. Fifty per cent. of our trade is with the eurozone. The launch of the euro means that an increasing number of UK firms are starting to use the euro—not just big business like British Steel, Ford, Philips, ICI and Unilever. Surveys by the Treasury's euro Preparations Unit show that some 45 per cent. of SMEs in the UK have trading links with Europe and they are already having to prepare to deal with the euro. The same survey showed that nearly half of all SMEs thought that the single currency would affect their business. Last autumn some 14 per cent. of SMEs were already planning to use the euro, and the latest survey by APACS showed that 247,000 companies intended to open euro accounts; 86 per cent. of large retailers have suppliers in the eurozone and 44 per cent. say they are planning to pay eurozone suppliers in euro from 1999. The euro is now an everyday reality for British business, large and small.

"When we came to office, we took immediate steps to help the country prepare. Since the Chancellor's Statement the Treasury has run a major information and direct mail campaign for the 1.6 million SMEs in the UK; 350,000 copies of the Treasury's business fact sheets have been distributed and there have been three-quarters of a million requests for the fact sheet leaflet; we have established 12 regional euro forums across the UK, led by senior business people, who are taking preparations forward at local level; firms can now pay taxes, file accounts, issue and redenominate shares, and receive certain grants in euros, and Customs and Excise has trained 10,000 staff to respond to business needs.

"Small businesses will have the help they need; the City of London is prepared and already taking a good share of euro-denominated business.

"But these are all preparations for the euro, with Britain, at present, out of it. It is also necessary now to prepare for Britain being in. If, as we have already announced, we want to keep open the option of making a decision early in the next Parliament to join, we need to step up our practical preparations now: hence, the national changeover plan.

"The public sector will give a clear sign of its commitment to prepare. Each department now has a Minister responsible for euro preparations and each will now report regularly on the preparations they are making.

"Where computer systems are being upgraded, all departments will build in euro-compatibility where that represents value for money. In the case of the DSS, the Inland Revenue, and Customs, the scale and complexity of their computer systems make advance preparations critical. Together, these departments are the main interface between central Government and the business community and deal with almost every individual in the UK. They may need to spend some money prior to a referendum to make their IT systems euro-compatible, so that we can maintain the flexibility for Britain to make the changeover as quickly and cost-effectively as possible.

"It is right that Parliament should be asked to give explicit approval to such expenditures, which will amount to some tens of millions of pounds spread over a number of years.

"We will therefore include provisions in the Finance Bill and the Social Security Bill which will authorise this spending; and of course there will be normal votes on the appropriation accounts.

"So the Government themselves will be making active preparations for the euro in the belief it will be in this country's interests to join in the future should our economic tests be met. Business should start to do the same.

"The national changeover plan sets out the range of work involved for different sectors; for example. in the retail financial sector the BBA and the APACS are leading work with the Bank of England on how to approach the conversion of their core IT systems. The retail sector more generally will be taking forward with consumers and suppliers work on a detailed code of practice on arrangements for the changeover. Businesses, large and small, need to focus on the impact of the euro on their business strategies.

"On the basis of this work, and after studying the experience of the first wave of participants, the outline plan that we are publishing today shows that it is possible to streamline the timetable adopted in Europe, with no disadvantage to our economy and some benefit. Overall, 'we believe it should be possible to move in four months from a government decision to a referendum; in 24 to 30 months from a positive referendum result to the introduction of notes and coins: with a further six months before sterling notes and coins are withdrawn.

"This means that the whole process from a positive referendum result to the withdrawal of sterling could be completed in around three years, considerably faster than the period required for the first wave of EMU participants. A great deal of further work needs to be done to refine and develop this timetable, and particularly to clarify how soon after a positive referendum result we could actually join EMU. As the plan makes clear, we are committed to taking this work forward in collaboration with business and the wider public sector, so that we can produce a further plan in about a year's time.

"I turn now to the economic tests the Chancellor set out on 27th October 1997. There is much focus, entirely natural, on the politics of the euro project. It is, of course, an intensely political act. But just as the euro cannot be conceived of, except politically; it cannot be made to work, except economically. It is, after all, an economic union.

"We have, as a Government, resolved the political issues, in favour of the principle of joining, should the economic tests be met. But they must be met. The manner in which we joined the ERM is a standing monument to the danger of joining a monetary arrangement on purely political grounds.

"There are two ideological and absolute positions on the euro which I do not share.

"The first is "No, never". It is to rule out Britain's membership of the euro on grounds of constitutional principle for always. It is perfectly principled. It argues, no matter what the benefits in terms of jobs or industry or even influence, such a decision is simply wrong, on grounds of sovereignty. I cannot accept this for the reasons I gave earlier: in the modern world, look around—technology, global finance, mass communication, to say nothing of travel and culture: this is a world moving together. Sovereignty pooled can be sovereignty, or at least power and influence, renewed. I suspect even if we were today to rule it out in principle and for ever, in a few years that ruling would itself come under question and in the meantime we would lose all influence whatsoever in the economic future of the EU of which we will remain a member.

"The second position is an unconditional "Yes, now". It is to say that economic conditions are meaningless and we should join regardless. But I believe the conditions are meaningful. It is precisely because the conditions are meaningful that we have said, to give some greater certainty to business and the country, that, barring unforeseen circumstances, we would not make a decision in this Parliament to recommend joining the euro.

"It is worth summarising the economic tests the Chancellor set out: sustainable convergence between the UK and countries within the euro-zone; flexibility to adapt to change in the UK and in continental Europe; the impact on investment and the UK financial services industry; and whether joining the single currency would be good for employment.

"Three points should be emphasised. The first is that economic convergence must be not momentary but, as far as we can accurately foresee, sustainable. We are still at a different stage of the economic cycle from the rest of Europe. But the difference between our official interest rates and theirs is narrowing. In October 1997, UK interest rates were at 7 per cent., with those in France and Germany at close to 3 per cent. UK interest rates are now at 5.5 per cent., compared to 3 per cent. for the euro area. The difference between our long-term interest rates and theirs is also falling, and is now down to around half a per cent. Long-term interest rates are now around their lowest for 40 years. Our inflation performance is consistent with the European Central Bank's definition of price stability. But it is essential that convergence is settled and sustainable. We cannot say that yet.

"Moreover, for decades, we have been prone to far greater swings in the economic cycle than our continental counterparts. It has been boom and bust. It has enormously damaged investment and reduced our ability to grow without hitting an inflationary ceiling at relatively low levels of growth.

"There is now an entirely new framework for economic management in place. Bank of England independence has at long last given us credibility in interest rate decisions, as well as low interest rates; and there are new fiscal rules that the Chancellor has relied upon to slash the £28 billion borrowing requirement and the ballooning national debt we inherited and to put us on a path of fiscal prudence. This new framework is a revolution in economic management for Britain. On its foundation, we have then put in place measures to boost education, skills, technology and productivity, measures to enhance the ability of business to grow and prosper. But we need to get through this more difficult part of the economic cycle and emerge stronger. For Britain to join the euro, it must be from a position of sustained economic strength.

"The second point is that these are early days for the euro itself. It is sensible to see how it settles down and how the ECB steers a path consistent with both strong economic discipline and the avoidance of deflation. Thirdly, it will take some time to make clear a judgment about whether the direction of economic reform in Europe will enable us to meet the tests we have set out, particularly on flexibility and jobs.

"Europe has a choice. Most of the countries in high and persistent levels of The Asian crisis has brought home to EU the fragility of the new world of Our world economy is more than ever before. The EU is not itself: but with the whole of the world "Europe has Europe have unemployment. all of us in the globalisation. interdependent competing with from Asia to America.

"The single currency alone will not make Europe prosperous. The single currency, plus fundamental reform in labour, capital and product markets and in our welfare systems, can do so.

"Economic reform is crucial, not just to the success of Britain's participation in the euro but to the euro itself. I understand the worries of those who, while not ruling out the euro in principle, are nonetheless concerned about the type of eurozone we might be joining. This is a real question. We must be sure the EU is moving forwards, not backwards. There are real problems in the EU and Britain can play a part in the solution.

"The economic reform programme includes the action plans which were started at our Cardiff Economic Council. They require labour market reform through greater flexibility; capital market reform through a European venture capital industry; and product market reform through extending competition and strengthening the single market. We are determined that these must be in place.

"The way to provide social protection today is not more and more regulation or high business costs and taxes; it is through making our workforce highly adaptable, more employable and better skilled; through encouraging the development of technology; promoting small businesses; and making our welfare systems help people off benefit and into work, with specific measures to combat social exclusion. We need a new social model for a new European reality.

"I want a Britain strong, economically disciplined: with boom and bust eradicated; flexible, competitive anti dynamic. And I want us in a Europe that at best is moving firmly in the same direction, rather than trying to hold us back. A vision that lets us adapt the European social model to the new realities of global commerce. A vision that binds the EU and America closer together and lets us learn from one another.

"We have stated as a matter of government policy that in principle Britain should join a successful single currency. That principle is real. The practical preparations we have set out are real. The conditions—necessary so that we proceed with caution and with common sense an in our own interests—are real. And we have set out a vision of Europe's future.

"We have a vision, but it is a vision that is practical. We should have confidence in Britain, in our vision and in our pragmatism. I commend the Statement to the House".

My Lords, that concludes the Statement.

4.54 p.m.

My Lords, at the outset, perhaps I may thank the noble Baroness the Leader of the House for repeating the Statement. It was a long Statement and was technical; indeed, at times, I felt that it was slightly contradictory. However, because of its length, we shall need to study it further. On the last occasion that the noble Baroness repeated a Statement, I failed to ask for a debate on the subject at the time—a fact that was held against me when I came to ask for such a debate through the usual channels. Therefore, perhaps I may make it quite clear now that we on this side of the House expect an early debate on the matter, so that we can discuss such issues in full and call the Government to account.

It is most appropriate that this Statement should have been made this afternoon, while we are discussing one of the more fundamental constitutional issues—namely, that of the reform of Parliament and the strengthening of Parliament. This, too, is a fundamental constitutional issue. However, I wonder how many noble Lords would recognise the following words and, indeed, who said them. They were reported in the Sun on 17th April 1997. I quote:
"I know exactly what the British people feel when they see the Queen's head on a £10 note. I feel it too. There's a very strong emotional tie to the Pound which I fully understand".
Of course, that was a Prime Minister in training; namely, Mr. Tony Blair, writing exclusively for the Sun newspaper before he was resoundingly elected a few days later by millions of people who thought that they would not live to see the day that such a Statement was made.

Under the rules that we have for Statements, I shall confine the rest of my remarks to questions for the Minister, which I hope she will be able to answer. However, if she is unable to do so, I shall expect to receive the usual letter which is normally forthcoming after these events. First, is it not fundamental to the issue of joining the euro that nothing should be done before the British people have given their consent in a referendum'? Therefore, are we not witnessing the start of a campaign, which will bully the British people into believing what the Prime Minister this afternoon has said is not so; namely, that there is an inevitability about this process? Therefore, are we now to understand that, in practice, the Government's policy is not "whether" but "when" we join the euro? Would it not be so much more sensible and honest to say so?

Secondly, does the noble Baroness have any idea when the Government propose to have a referendum on the policy for which they are committing money today? I note that the Statement confirmed that the decision would not be taken in this Parliament. Does that mean that there will be no referendum Bill until after the general election—assuming that the Labour Party win such an election? If there is a changeover plan, there is presumably a target date for entry into the euro. I do not suppose that the noble Baroness would share that with us now. Nevertheless, it would be helpful to probe the Government's mind on their thinking as regards timing.

Thirdly, I turn to the question of cost. Many costs are involved in the Statement which has been made today. Can the Minister say how much money is being committed to the propaganda campaign for the euro? Further, can she tell the House whether any money spent in the changeover campaign will be coming from the European Commission or indeed from other EU funds, which will therefore deny other projects the spending that they were promised? Of course, the costs are not just those associated with propaganda. For example, how much will it cost the public sector to prepare for the euro, money which will be paid for by taxpayers? Moreover, how much will it cost the private sector—money which, of course, will be paid for by consumers?

Fourthly, can the Minister say what studies have been carried out—I am sure that many have been commissioned by the Treasury in recent months— regarding the total estimated cost of putting forward this plan, whether or not it is ultimately accepted by the British people? I also have a question about shadowing the euro. It is my understanding that the Maastricht Treaty requires countries preparing to join the euro to shadow it for two years. Is that also the understanding of the noble Baroness? Indeed, do the Government have any plans to shadow the euro? Will she undertake to inform the House in a Statement at once of any plan to shadow the euro, given its huge economic and political significance? Will the noble Baroness also confirm that no instructions on this matter have been given to the Bank of England?

Finally, in his extensive morning briefing on this announcement, the Prime Minister's press secretary said that there was a "change of gear", as we heard again in the Statement, and that this "change of gear" was about giving Britain a choice. The word "choice" is an important one. What work therefore is being done to prepare for the possibility that Britain will not agree to join the euro? What information is being given to various organisations to provide people with the kind of information to offer them that real choice? What thought is being given to ways in which the United Kingdom and UK business could use the economic freedom they would retain if they kept the pound? Is not the changeover plan really what it has already been described as; namely, a national handover plan and evidence that the Government have taken this historic decision to push for abolition of the pound before Parliament and people have been consulted?

In more ways than one this is a sad day. I am no Eurosceptic but I fear very much that the decision which has been taken today is a decision that has every possibility of being paid for in the loss of livelihoods, a lowering of living standards and the loss of jobs. It also fundamentally affects our ability to control our affairs. It is a day to be regretted. However, I very much look forward not only to the noble Baroness's response but also to the confirmation that there will be a full debate at the earliest possible opportunity.

5.1 p.m.

My Lords, I too thank the noble Baroness the Leader of the House for repeating the Statement made by the Prime Minister in another place. I join with the noble Lord, Lord Strathclyde, in endorsing the idea of a debate although I should have thought he might prefer to avoid that experience. It will be interesting to discover when the time comes how his non-Euroscepticism shows, and how far his Benches are able to follow him on that. I doubt whether they will follow him more closely on it than on the other matters which your Lordships are discussing today.

At first sight—that is all one can say—this is an important, welcome and yet at the same time a curiously unsatisfactory Statement. Indeed it is less of a Statement than a speech, both in its length—I do not complain about that—and in its tone. I hope that my next remark will not upset the noble Baroness. I quote the final sentence of the Statement,
"We have a vision, but it is a vision that is practical. We should have confidence, both in our vision and our pragmatism".
That is a sentence worthy of Harold Wilson at his most equivocal when backing Britain going into the European Community a generation ago and only half admitting it. It would have been far better had the Statement been a ringing call of some kind, but it is not that at all. The general flavour of it is two steps forward and one step back. There are the announcements and the detail, which I do not wish to quarrel with, but all hedged around with conditions. If they are not new, why was it necessary to repeat them, except essentially as a nervous prelude to aspects of the Statement which might be rather less popular?

There were times when the Statement seemed like a prelude, another prelude to yet another missed opportunity. Certainly the timetable is extremely disappointing, although I shall ask the noble Baroness in a moment to make rather more explicit some matters which are certainly not clear to me. The Statement states,
"we want to keep open the option of making a decision early in the next Parliament".
It does not say that a decision will be made, or what it is likely to be. As I say, it is a Statement hedged around with reservations of a kind which I should have thought at this stage in this Parliament the Government would have done better to avoid.

As regards the timetable, on my calculation if no decision is to be made until after the election, and there is a gap of four months until a referendum, and then a period of two-and-a-half to three years before sterling is withdrawn, it seems to me the change is likely to be accomplished in 2005 or later. Will the noble Baroness confirm that that is the kind of timetable, looked at as a whole, which makes sense? If that is the case, the change would be accomplished more than half-way through the next Parliament. I should have thought that the wrong time to complete a change of this importance. It would have been far better, if a decision to join were made this year, for a referendum to be held the following year, and the early years of the next Parliament used to implement the decision, assuming it was endorsed by the British people. There are all kinds of indications that the momentum is there. Given some leadership from the Government we could have moved forward to a quick, easy and plain decision which would have had the widespread support of the nation.

However, if this Statement leaves no song in my heart, it would be ungenerous to appear to be other than supportive of the noble Baroness and the Government, faced with the alternative—if that is what it proved to be—of supporting the noble Lord, Lord Strathclyde, and, in particular the Conservative Party's Treasury spokesman, Francis Maude, whose comments earlier today I thought were wholly inappropriate and showed how far the Conservative Party is out of touch with political and economic reality. I welcome the Statement so far as it goes. I feel a degree of disappointment that it does not go far enough.

5.6 p.m.

My Lords, I am grateful to both noble Lords who have spoken for what I would describe as their acceptance if not welcome of the Statement. If I may say so, both have fallen into precisely the ideological and absolute positions on the euro which the Prime Minister described in the Statement, which I repeated, the first being "no, never" and the second "yes, now". As I hope the Statement explained, this is precisely the course that we hope responsibly to travel between.

I am sorry that the noble Lord, Lord Strathclyde, felt once again sad about the Statement. It seems to be his permanent psychological state at the moment. I regret that, given that yesterday we all celebrated his birthday. I attended the presentation of the Statement by my right honourable friend the Prime Minister in another place and I believe that the noble Lord would have been perhaps not surprised at but certainly out of tune with the reception that the Statement was given by the previous deputy Prime Minister, Mr. Heseltine, and the previous Chancellor of the Exchequer, Mr. Clarke. However, we know of course that this is not something—like the constitutional issue which we are also discussing this afternoon—on which the party opposite is united.

I, of course, accept both noble Lords' requests for a full debate on this subject. It is right that we should discuss it. It is a momentous and important Statement. The timing would, of course, be for the usual channels, but I am grateful that they both raised the point in principle. I am sure that we shall be able to carry that forward through the usual channels.

I must refer briefly to the concern of the noble Lord, Lord Strathclyde, as regards the Queen's head on the coinage. This was something I had not followed until I attended the relevant briefings on the subject earlier. The noble Lord and the House may not know that the Chancellor of the Exchequer has obtained agreement that the Queen's head will remain on the coinage if we join the euro, and the position as regards bank notes is under negotiation. The Government are conscious of precisely the points which the noble Lord raised. This is a matter we are attempting to take forward.

On the point about whether or not it is irresponsible to initiate any form of preparation, such as is described in the Statement and in the background documentation, I should emphasis again that the Government feel it is right to announce the preparations and the outline plan for consultation to enable the country to make the real choice that it may be asked to make when the time for a referendum comes. To do so without the appropriate preparation would simply be an invalid and unrealistic choice requiring, were there for example, to be a yes vote, much further delay than the Government feel would be responsible to undertake on behalf of the country if that yes vote was forthcoming. The noble Lord will be aware that the timing will depend precisely on the understandings about the convergence of the economic conditions, clearly laid out since the Statement of my right honourable friend the Chancellor in October 1997.

As for the timing of the referendum Bill and the referendum itself, I suggest to both noble Lords who invited me to be more precise, that they are actually asking for some kind of projection about the date of the next general election. As the Statement clearly states, unless there are some unforeseen economic changes, that position will not be reached until the next Parliament. It is clearly not possible to attach dates to the particular critical path described; they are entirely dependent on the start date of the decision by the Government that it is in the economic interests of the UK to join the EMU.

Perhaps the House does not entirely share my enthusiasm for this, but we now know more about passing referendum Bills than we did at the time of the general election when the Government came to power. On the basis of experience, it is not unrealistic—as the Statement says—to say that we could proceed from a decision based on the economic criteria to a referendum in about four months.

The noble Lord, Lord Strathclyde, asked about the costs. It is true, as the Statement says, that there will be some expenditure of some tens of millions of pounds—not, as he suggested, on a propaganda campaign, but on practical matters such as upgrading the relative computer systems in the DSS, Customs and Excise and the Inland Revenue offices where it is particularly relevant to practical preparation for possible entry into the euro. As I understand it, that upgrading of computers will not take place simply in order to achieve the practical preparations. Where the computers and other systems are being upgraded in any undertaking of business projections, they will be adapted in such a way that they could be used for the euro. That seems to me a practical and very sensible provision. It is not in any way outside the normal competence of what one would describe as appropriate business and economic strategy.

As to the final point the noble Lord raised, it is not the Government's intention to shadow the euro. We have never suggested that, and it is not our policy. I will of course write to the noble Lord if I have left out any of the important points which he made. I think that I have covered the major ones.

5.12 p.m.

My Lords, I would call this national changeover plan a "changeover of national opinion plan." That is surely what it is all about. The technical matter of preparing—as any sensible government would—for the introduction of a new currency would not justify anything like the kind of Statement we have heard. Frankly, is not the real reason that the Government are now launching their pre-referendum campaign with the aid of substantial sums of public money? Is not another related reason the fact that the heads of government of the European Council are meeting in Germany at the end of this week and the Government are desperately anxious to disarm the expected German attack on the British failure to harmonise our taxes and to change our contribution to the European Community?

My Lords, I suspect that my noble friend and I will always have a disagreement in principle; I hope that we both accept that we take our positions from honourable backgrounds. I am sure my noble friend will appreciate that a great deal of the Statement and a great deal of the background document, which, with his usual assiduousness, he has probably already read, relate to the technical, practical and—as I said in answer to the noble Lords, Lord Strathclyde and Lord Rodgers—what I would call effective and sensible business strategy rather than any kind of propaganda. As the Statement makes clear, it is intended to try and move towards a situation where the real choice is legitimately on the table. That involves some practical preparation, but not necessarily the influencing of opinion; rather the influencing of business strategy.

My Lords, does the noble Baroness accept that the position taken by these Benches is motivated by the economic interests of this country and not by ideological, crazy passion? As shown in conference last week, both the TUC and companies such as Vauxhall think it important for direct investment reasons that this country joins the euro. Is the Minister also aware that 80 per cent. of people in this country believe that we will eventually join the euro? They can perceive the economic advantages of lower interest rates, prices and so on. Does this not suggest a greater need for public information at this stage? People are looking for the kind of leadership, through information, that the Government could provide. As my noble friend Lord Rodgers said, while this is a welcome step, it does not go far enough in providing the kind of leadership that opinion polls show people are crying out for.

My Lords, I am grateful to the noble Baroness for her comments. Once again, if I may say so with respect, she slightly misses the point of the Statement which is to address the practical preparations for the business case which could be made for consideration, at another stage, of economic convergence.

I take her point about the role that business has played so far. It is important that the Governor of the Bank of England, the heads of the Financial Services Authority and the British Bankers Association, the presidents of the CBI and the British Chambers of Commerce, and the general secretary of the TUC have been involved in producing this document. They will be involved in the very important and more detailed work which will need to be undertaken in order to answer some of the questions about timing and the analysis of convergence issues which have rightly been raised.

My Lords, will the noble Baroness the Leader of the House accept that this statement of intention to join a successful single currency, however tentatively presented, will be welcomed by very many men and women who care deeply about the future well-being and prosperity of this country? To that end, can she assure the House that that intention will henceforward be fulfilled—not by accident or osmosis but by making it an important objective of government policy?

My Lords, I am extremely grateful for what the noble and learned Lord, Lord Howe, says about the background principles of this policy. I hope it was clear from the Statement that the Government are—as was originally proposed by my right honourable friend the Chancellor of the Exchequer in his Statement of October 1997—advancing the principle that if the euro is successful, and if the economic conditions of the euro are suitable for this country and promote better jobs, better industrial progress and so on for Great Britain, that is the policy the Government will pursue. We do not intend to pursue it to the economic disadvantage of the country, but we certainly intend to pursue it within the criteria I have described.

My Lords, as the noble Baroness has made considerable play about the number of SMEs which maintain euro accounts, I wonder whether she can tell the House how many SMEs trade in US dollars and maintain US dollar accounts? Can she also tell the House whether she has noticed that there is an almost unanimous view being expressed by officials in Brussels, and by elected government Ministers in euroland, that EMU is only the first step towards a united states of Europe? If the Government do not agree with that proposition, how, once they have got us in, will they prevent our being dragged into such a confederation?

My Lords, on the point about the number of SMEs trading in dollars, I am advised by my noble friend Lord Simon of Highbury—who has taken a very important lead in this project on behalf of the Government and whom we thank very much for his activities in liaising between the Government and the business community—that the number of SMEs dealing in dollar trading accounts is probably much less than the number of SMEs now doing business with Europe. It is important to recognise that 45 per cent. of SMEs describe themselves as having important trading relations with Europe. That is 700,000 small businesses which, on any basis, should not be ignored.

On the point about "dragging", as the noble Viscount said slightly pejoratively, this country along in the general European direction, we will of course remain members of the European Union whatever happens as regards our joining or otherwise the single currency. It is the European Union which may pursue the political agenda; we will, as always, protect British interests in that forum.

My Lords, will the noble Baroness please go to the lap of the noble Lord her father and ask him to remind her of the horrors of the 1967 devaluation? Will she even ask for the advice of the noble Lord, Lord Lamont, who also went through the horrors of coming out of fixed exchange rates? Will she furthermore pray to the ghosts of Sir Stafford Cripps and Philip Snowden. both of whose political careers were very nearly destroyed by coming out of fixed exchange rates? Can we not learn that fixed exchange rates have done this country no good whatever and that we should therefore keep out of them and plough our own furrow in a way we are quite capable of doing? To say that we are not is to underestimate our own abilities.

My Lords, I am, as always, grateful to the noble Earl for his trenchant comments and for his trenchant advice. Although he invites me to go and sit on the lap of my father, I would say that he is being, as usual, extraordinarily flattering because, as an extremely grown-up person in 1967, I have clear memories of the Labour Government's problems in that period. As I said to my noble friend Lord Shore, I think we would have a disagreement in principle about the relevant economic and political decisions that we need to make. Those are ones which, as the noble Lord, Lord Strathclyde, said, are issues of national policy and national strategy which we should have an opportunity to debate. I do not think that they are necessarily relevant to the much more technical discussion about preparation which we are discussing this afternoon.

My Lords, does my noble friend agree that it is very necessary indeed to maintain the expectation of Britain eventually going into the euro? That in itself will help with convergence. The financial markets and potential investors will behave towards this country in the light of the expectation of our going in and the expectation of our going in will produce positive results in the markets. Does she further agree that it is important to get an absolute undertaking from Brussels that we will not be required to enter into ERM2? In Brussels it is still insisted that we shall have to. If we do not wish to do so, and if that is to become a block to our going into the euro, it is important that we should have the matter settled once and for all.

My Lords, my noble friend makes some interesting comments about what one might call the virtuous circle of expectation and real economic development. I have heard it suggested—this is perhaps relevant to the comment of the noble Earl, Lord Onslow, in his intervention—that the only prospect of there being tremendous jitters in the currency markets on the basis of the programme we have outlined is if there were to be, somewhat extraordinarily in the present circumstances, the prospect of a Conservative government being elected at a general election, which is rather a change from what happened in the 1960s and the 1970s. Those who experienced that will be very clear about it.

On the point about ERM, I can say to my noble friend that there is no intention of doing that. As far as I am aware, no member state has raised that question in Brussels recently.

My Lords, I know that many senior business people and many distinguished political leaders whose judgment I respect believe that our membership of the euro in due course, if not immediately, is inevitable. But there is a possibility that the convergence schedule will not go as planned. Indeed, if one looks at Europe at the moment, although it is early days, one could say that divergence is more the keynote, with the German economy actually shrinking and wide divergences in economic performance growing even within euroland, let alone between ourselves and euroland. In that situation it is a practical possibility, for which we need to prepare, that we might find ourselves outside euroland, which will continue, and operating a local currency, sterling, not just for a few years but for a considerable length of time. Perhaps I may repeat the question of my noble friend Lord Strathclyde. Is it not a matter of preparing for the practical arrangements that might arise if we found ourselves in that position? Would it be too much to ask that, in the name of balance in this matter, which I know the Government are very anxious to maintain, a working party and a White Paper should be produced to define the ways in which we can benefit and prosper in that situation, which is possible?

My Lords, with respect to the noble Lord, Lord Howell, that is precisely what the plan does. It accepts the possibility that the strict criteria of economic convergence have to be achieved in order for the Government to accept the case for joining EMU. The Government believe that their macro-economic policy and the new financial and economic structures that they have put into place in the past 18 to 19 months are precisely those which enable the British economy to grow. I should have thought that our capacity and indeed our expectation to avoid recession precisely encourages the convergence criteria to be more likely achieved than not. Perhaps that was what the noble Lord, Lord Howell, was referring to. On the point made by the noble Lord, Lord Strathclyde, it really is not possible, except in the most theoretical terms, to estimate what the possible costs to industry might be of staying out of EMU. Therefore, that is not a realistic strategy to plan for in the way that we are hoping to do with the announcement of the outline plan today. But we do believe that there is a real choice. It is in order to make that real choice have political and economic validity that we are proposing this plan.

My Lords, I welcome this Statement and look forward to studying the plan. I should like to pay tribute to the work of the Treasury euro unit over the past couple of years in combining and co-ordinating all the detailed technical work of the various interests involved in preparing for the euro. I think that the House should also take the opportunity to pay tribute to the Bank of England for the work it has done over a much longer period in co-ordinaling the interests of the financial market and the City of London in general in preparing for the euro and being actively involved in the conversion to the euro at the beginning of this year, enabling the City of London and our financial institutions to be not only up to speed but ahead of the game in many cases and to prosper, albeit that we remain outside euroland.

My Lords, I am grateful to the noble Lord, Lord Cobbold, for that authoritative view on this sector. Naturally, the Government are concerned to protect the financial sector and the strength of the City of London within or without the euro position. I join him in paying tribute to the work of the Bank of England. As I said in the Statement, it has been advantageous to the preparation by the various teams involved that the BBA and the Bank of England specifically have taken such an active role and have played such a constructive part in drawing up these plans.

My Lords, I very much welcome the Statement so far as it goes. Can we now hope that the Government will be prepared not to hide behind the undoubtedly important technical work that is being undertaken but to give a real lead from the Prime Minister downwards in leading Britain towards the economic convergence that we need? Does the noble Baroness agree that there is another side to this convergence, which is the convergence that has to take place from Europe? I refer to the restructuring of European industry and the restructuring of social and labour costs inside Europe. To present a referendum to the British people where we are inviting them to go back to the 1970s is not a proposition they will find very exciting.

No, my Lords, I recognise that. That is precisely why the passage in the Statement, which was very clear and perhaps more detailed than some noble Lords appreciated—I concede that that added to its length—described the alternative social model which the Government very much hope to persuade the rest of Europe to follow and which we feel will be important to the success of our society as well as our economy.

On the point about the Prime Minister giving a lead, I say to the noble Lord, Lord Garel-Jones, that a lead has been given in a responsible way since the Statement made by my right honourable friend the Chancellor of the Exchequer in October 1997 which, I emphasise again, very much gave the go ahead to joining EMU but with the very important and responsible criteria laid down beside it. What the Prime Minister said this afternoon underlines that point. I am sure that at the moment, if it comes, when convergence is identified within the scope of the criteria that have been clearly demonstrated, the Prime Minister will, as always, give a very important political lead.

My Lords, does the noble Baroness accept that many people will find this Statement extraordinarily timid? The Government say that business will take some satisfaction from the fact that there is certainty—namely, that no decision will be taken until the next general election. I suppose one should be grateful that there is not uncertainty—but, my word, if that is certainty from the Government it leaves a lot to be desired.

The Statement refers selectively to the economic convergence criteria. Does the noble Baroness accept that on at least two of those criteria—namely, of creating better conditions for firms making long-term decisions to invest in Britain and the City's competitive position—it is already abundantly clear that Britain's economic interests lie with joining the euro? Finally, on a practical point, the noble Baroness talks about a four-month period between taking a decision in principle to hold a referendum and the referendum taking place. Will the Government accept that, were that to be possible within the first months of a new Parliament, the sensible way to prepare for it would be to introduce and pass a paving Bill in this Parliament so that the Government could get on with matters after the next election?

My Lords, this 20 minutes of exchanges has been fascinating. We have seen precisely identified the divisions between—I think the noble Baroness was slightly concerned when I said ideological grounds; I was simply quoting from the Statement—the "no, never" and the "yes now, under any circumstances" positions of noble Lords.

I emphasise again that the Government see what they call the cautious but nonetheless responsible and determined path which is outlined in the Statement and the background document as the most useful one to follow. I cannot see any advantage, whether political or economic—and certainly it would not be in the interests of the British people—in saying that we shall go hell for leather for EMU whatever the costs to industry and whatever the background in terms of the issues raised by the noble Lord, Lord Cobbold, on the City of London and whatever the grounds in regard to the social impact and social policies mentioned by the noble Lord, Lord Garel-Jones. This is a responsible policy of practical preparation. It is based on a decision in principle which has been made clear by my right honourable friend this afternoon. Noble Lords should accept it on that basis.