Single Currency

Oral Answers to Questions — Treasury – in the House of Commons at 12:00 am on 15th April 1999.

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Photo of Geraint Davies Geraint Davies Labour, Croydon Central 12:00 am, 15th April 1999

What recent representations he has received from business on the single currency. [79458]

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

My right hon. Friend the Chancellor receives many representations from business on the single currency.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Does my hon. Friend accept that support for the euro among larger international trading companies is much greater—as it is in the City—than among smaller companies, partly because larger companies see the natural trade benefits if we join and the prospective loss of investment if we never join the euro? What action is being taken to inform and advise small and medium companies on the benefits of the single market and the single currency—particularly those that link their supplies to international companies, which obviously have much greater interest in trading in euros?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

I thank my hon. Friend for that question. Our priority for small and medium companies is to help them to adjust and to take advantage of the opportunities that were created by the introduction of the euro earlier this year. Some 750,000 small and medium firms in our country already have trading links with Europe. That is nearly half our small and medium firms. All of them could be affected by the euro, regardless of whether we finally decide to join economic and monetary union. We have been ensuring that they are aware of the euro and its implications, and have been helping them to adjust to that new reality.

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

Does the Minister accept that many small to medium enterprises are operating at the margin? They are already reeling from new rulings and regulations from the European Union adopted by the Government, such as the 48-hour directive. Will she explain to the small to medium enterprises that, if we go into a single currency, interest rate policy will be directed from elsewhere and they will have to pay higher interest charges just for the benefit of other parts of the EU?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

My right hon. Friend made it clear in his statement to the House in October 1997 that the overriding test for whether Britain should join the single currency would be whether it would be good for our economy and our businesses, for jobs, for investment and for the City. Of course that includes small businesses, but, at this stage, I hope that the hon. Gentleman agrees that the priority is to ensure that small and medium businesses in this country, half of which already have trading links with companies in other parts of the EU, are given all the help that they need to trade with suppliers and customers who use the euro. We are helping small businesses to adjust to the euro. We are also helping them by introducing the lowest rate of corporation tax for small businesses ever in this country.

Photo of Jim Cousins Jim Cousins Labour, Newcastle upon Tyne Central

Does the Minister accept that, since the euro was introduced, it has been managed by the European Central bank to achieve a falling exchange rate against the Anglo-Saxon currencies? That has now been compounded by an interest rate cut in Europe, placing our trading exporters in industries and services in a more difficult position. Can my hon. Friend assure us that she is making representations to the European Central bank to try to prevent competition over exchange rates?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

I would observe that 80 per cent. of the rise in sterling's value came under the Conservative Government. We have made the tough decisions necessary to end the cycle of boom and bust, bring inflation down and get the public finances under control after we inherited from the previous Government a public sector debt of £26 billion. We have created the conditions for economic stability that, in turn, can underpin a stable and competitive exchange rate.

Photo of Edward Davey Edward Davey Opposition Whip (Commons), Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury), Liberal Democrat Whip

Does the Minister agree that many pro-euro businesses have concerns about the rate at which the pound will join the euro? Will she acknowledge that it is important that the level of the pound be reduced, because it is not competitive? Will she promote a public debate in the country and among our European partners on the sustainable long-term rate for the pound, so that we can join the euro at that rate?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

As I have just said, of course we want a stable and competitive exchange rate. The way to achieve that is to put in place the conditions for economic stability. That is what we have done by giving independence to the Bank of England and by ensuring that inflation falls and stays low. We now have the lowest long-term interest rates for 40 years, the lowest mortgage rates for 33 years, and the lowest rates of corporation tax ever. Those are the conditions for economic stability that, in turn, will underpin a competitive and stable exchange rate.