Economic and Monetary Union

Part of the debate – in the House of Commons at 5:25 pm on 24th January 1991.

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Photo of Mr Ian Stewart Mr Ian Stewart , Hertfordshire North 5:25 pm, 24th January 1991

I am afraid not, as I wish to respect the wishes of the Chair. We have all been asked not to speak for too long.

I have a few practical comments about the hard ecu. As I understood my right hon. Friend the Chancellor, inherent in his system would be recourse by individual member states to indemnify the European monetary fund for any losses that might be sustained by the issuance of hard ecus against the basket of currencies which incorporated a currency that devalued within the EMS. Such an arrangement would be essential and I hope that, in his negotiations, he will draw attention to this.

Any proposal that led to the conversion of softer currencies into hard ecu where the exchange risk was carried by the Community as a whole would not be fair on the countries that were managing their currencies more responsibly. It is an essential technical part of the proposals that what my right hon. Friend said this afternoon should have the practical effect of throwing that risk on to the countries whose currencies were weaker.

There is a prospect that a hard ecu could become commercially useful within the European Community as many more companies trade more thoroughly throughout the different countries within it. One of the arguments advanced by the Commission and others in favour of monetary union is that it would reduce exchange costs and conversion prices of currency in covering contracts. If one had an acceptable common currency such as the hard ecu, that benefit could be achieved without monetary union but by the step advocated by my right hon. Friend.

The other point—I speak only personally in this—is that I should find it useful to have a currency that I could use in any of the member states of the Community, perhaps initially only in hotels, for transport or such purposes, and perhaps only in the capitals or the main commercial or political centres. I suspect that many others, in this country and on the continent, would find that a valuable development.

To pick up a point made by my right hon. Friend, I can tell him that, in the Napoleonic wars, the Bank of England issued tokens that were acceptable as currency but were never legal tender. The same is true of Scottish bank notes now, which are acceptable in Cumbria, Northumberland and other northern counties and even in the Post Office of the House of Commons, but are not technically legal tender. There is no obstacle to the use of a common currency internally for retail and personal expenditure even without the full sanction of legal tender, a point mentioned by my hon. Friend the Member for Stamford and Spalding (Mr. Davies) in his intervention.

I should welcome such use of the hard ecu as a helpful development. I congratulate my right hon. Friend the Chancellor and his predecessor, who is now the Prime Minister, on putting forward an idea that is valuable not only intrinsically but in terms of our negotiations with the European Community, and an idea that I should like to see put into effect. I hope that he will be as successful in persuading other member states that that should be done.