Brown explains EMU hardline

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The Independent Online
The Treasury is to publish a report outlining the obstacles to Britain joining a European single currency before the next election.

The report, to be released by the Chancellor, Gordon Brown, will underline statements made yesterday which harden the position against early entry into European monetary union (EMU).

Mr Brown had been due to make a statement to MPs before Christmas, but has decided to bring it forward. It will now take place before the Luxembourg jobs summit on 18 November, and could happen as soon as MPs return tomorrow week.

The report assesses prospects for EMU under key criteria including job creation, the impact on the City, the country's readiness, and the convergence of economic cycles. Mr Brown's Commons statement will be designed to end the speculation that has dogged the Cabinet since the Financial Times reported last month that the Government was getting set for early entry into EMU.

The story prompted big market and currency movements and speculation of a split between Tony Blair and his Chancellor. Mr Brown's interview with the Times yesterday aimed to send the message that he and Mr Blair are at one, and to kill speculation about early EMU entry. The quotes in the interview did not substantiate the bold headline: "Brown rules out single currency for lifetime of this Parliament. "

Repeating the phrase that the UK was "highly unlikely" to join EMU in its first wave in 1999, Mr Brown said: "If we do not join in 1999 our task will then be to deliver a period of sustainable growth, tackle long- term weaknesses in the UK economy and to continue to press for reform in Europe."He could probably not have been more specific without being accused of making policy pronouncements to newspapers not Parliament. But the implication of what he said is - as the Independent on Sunday reported three weeks ago - that a referendum on EMU will not be held before the next election.

Behind the scenes the following scenario was being sketched by senior government sources. If Britain, as expected, stays out of the first wave in 1999, it will take at least one year, possibly two, to determine whether the system could work to our advantage.

Even if a decision were taken in 2000 or 2001 there would then be another gap, probably of two years, before entry could be completed. This would be needed for the necessary legislation (including that needed to make the Bank of England fully independent) and for economic preparations. All this makes a referendum before the next election practically impossible.

Proponents of EMU argue that this formulation does not preclude the UK signing up in principle to monetary union before the next election. Sceptics believe that this is less than likely. The truth is that public opinion is likely to determine which of those positions is true.

Rumours of a split between No 10 and No 11 Downing Street are denied by both sides. Since many discussions between Mr Blair and Mr Brown have been on a one-to-one basis, the considerations have been shrouded in secrecy. But both men have probably been grappling to find a way to retain some influence over the process, without a politically risky commitment to entry.

The decision to harden the stance was taken last Thursday, at a meeting involving Robin Cook, the Foreign Secretary, and John Prescott, the Deputy Prime Minister. All realise that, with a majority in opinion polls still against a single currency andmuch of the press hostile, a referendum before the next election would be a huge gamble. Labour would risk losing the referendum and reviving the Conservative party as a political force.

The message of the past few weeks is that Mr Blair, who says much about changing our relationship with Europe and the world, will do it in a gradualist way. He may be a moderniser, but he is a pragmatist, too.