§ Mr. Gordon Brown
I represented the UK at the Economic and Finance Council—ECOFIN—of the European Union in Brussels on 13 October, and at a formal dinner with Finance Ministers from the EFTA countries the previous evening.
The Council welcomed the UK's Convergence Programme—in particular the Government's commitment to sound finances and stability-oriented monetary policy as a basis for economic growth and investment. The Council also noted with satisfaction the changed arrangements for the implementation of monetary policy, which have helped to lower inflation expectations in the UK. The Council also noted with approval the Welfare to Work initiative and the Employment Action Plan. The Council agreed Conclusions on the Programme and adopting a text for an Excessive Deficits Recommendation. The text of the Conclusions follows this answer.
The dinner, on 12 October, was a useful opportunity to exchange views with the Finance Ministers of Norway, Switzerland, Iceland, and Liechtenstein, particularly on employment. I was pleased to see the support that my own approach to employment and employability enjoys both within the EU and EFTA.
The Council discussed the Commission's Communication on Harmful Tax Competition in the EU, focusing on the Code of Conduct. The UK recognised that a voluntary Code might play a helpful role in tackling harmful tax competition, but would only agree to a Code 17W that respected Member States' continues competence in the field of tax. The UK, and other Member States, called for several changes to be made to the draft Code. Discussion on the Code will continue in the Taxation Policy Group.
The Commission introduced its Communication on the Practical Aspects of the Euro. This was another useful exchange of views, with Ministers contributing their ideas on how to ensure the smoothest possible transition both for businesses and for public authorities in those countries joining the single currency in January 1999.
The Council considered the liberalisation of capital movements in the context of the IMF. Discussion centred around the compatibility of possible new IMF articles with the Treaty. Council agreed that Monetary Committee should refine EU policy on IMF proposals but that Member States should continue to represent themselves in negotiating the new articles.
The Council discussed a Commission Communication on Public-Private Partnerships in the sphere of Trans-European Networks. The Communication was the result of work by Commissioner Kinnock's High Level Group on the same subject and was welcomed.
The Council took some agenda items over lunch. We discussed the Commission's proposals on enlargement as set out in their July proposals on Agenda 2000. For the UK, the key issues were that the 1999 Own Resources Ceiling of 1.27 per cent. of Community GNP is not raised for the period 2000–06, and that spending is set at levels much lower than this. Substantial policy reform is also necessary to make enlargement affordable and successful. The Council agreed to consider at the next ECOFIN the work to be carried forward on the development of economic coordination in Stage 3 of EMU. The Presidency described its preparations for the Jobs Summit on 20–21 November, and an extraordinary meeting of the ECOFIN Council was agreed for 5 November to do further work on this.
Text of Council conclusions on UK convergence programme
On 13 October 1997 the Council welcomed the new United Kingdom Convergence Programme. It noted the progress that had been made in reducing the government deficit and inflation under the previous programme and it welcomed the new government's ambitious but realistic programme to enhance the pace of adjustment.
The Council welcomed, in particular, the government's commitment to sound finances and stability oriented monetary policy as a basis for economic growth and investment. Action has been taken to increase the pace of deficit reduction: the Council noted with satisfaction that the government deficit will be well below 3 per cent. of GDP in the calendar year 1997 while the debt ratio will remain below 60 per cent. of GDP. It noted that the continued commitment to tight expenditure control represented a sound basis for long term budgetary consolidation. The Council urged the UK authorities to make sure that continued borrowing over the economic cycle to finance investment represents an adequate medium term fiscal rule consistent with the objectives of the stability and growth pact.18W
The Council noted with satisfaction the changed arrangements for the implementation of monetary policy, which have helped to lower inflation expectation in the UK. The Council also encouraged the UK Government to recognise the role of the exchange rate in maintaining stability. The Council noted the UK inflation target of 2.5 per cent. and urged the UK Government to keep this under review in order to ensure that UK inflation remains low and compatible with inflation rates in other Member States.
The Council noted with approval the broader social and economic objectives outlined in the programme and in particular, the concern to improve the opportunities for employment for the young and long-term unemployed. The Council noted that these issues are also dealt with the UK Employment Action Plan. The Council invited the Commission, in close cooperation with the Monetary Committee, to monitor the implementation of the Convergence Programme.