The Recall of Parliament: Howe urges early return to monetary system: The House of Lords

FORMER Chancellors of the Exchequer from both sides in the Lords last night pressed for Britain to rejoin the exchange rate mechanism in months rather than years. There were also calls, during the emergency debate on the economy, for strong government action to control currency speculation.

Lord Howe of Aberavon (C) said last week's events had been a 'serious setback' for Britain and the wider world, but added that they did not destroy the case for a European monetary system. He said: 'I remain convinced - and I hope the Government does as well - that the exchange rate mechanism, with some adjustments, will be seen to remain the only serious framework for monetary discipline.'

Lord Callaghan, the former Labour Prime Minister who resigned as Chancellor in 1967 over devaluation, called for a return to the ERM, with a realignment of currencies against the deutschmark. He said devaluation never was an 'easy way out'.

Currency speculation by institutions had been a 'scandal', he said, and suggested a 100 per cent tax on speculators' profits.

Lord Healey, another former Labour Chancellor, said that Mr Lamont's credibility had been destroyed: 'I cannot see why anyone should believe any word that the Chancellor now tells us.' He criticised Mr Lamont for his attacks on Germany and the Bundesbank and accused the Government of 'political cowardice' for failing to raise taxes.

Lord Jenkins of Hillhead, the Liberal Democrat's leader in the Lords, said Britain's 1990 ERM entry date 'defied rational explanation. We had missed the good years and come in only for the rough ride.' The Prime Minister's European policy was 'badly flawed', the former Labour Chancellor said.

He believed Mr Major genuinely wanted to put Britain at the heart of Europe, but the economy he had inherited from Lady Thatcher was 'just not up to it'.

Lord Cledwyn of Penrhos, Labour leader in the Lords, accused the Government of a 'policy of paralysis' for failing to take action on the economy during the summer.