Blair set on a collision course with EMU

"Mr Blair has served notice that he will be resolute in standing up for British interests. The veto will be safe in his hands."
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The Independent Online
In March 1991, John Major made a pilgrimage to Bonn. There he told a delighted Helmut Kohl of his aims for Britain. "I want us to be where we belong, at the very heart of Europe, working with our partners in building the future." Four years later, it is the turn of Tony Blair to turn up in Bonn. And in his keynote speech he, too, had "no doubt at all that the future of my country lies in being at the heart of Europe".

Mr Major's affair with Europe - and with Germany in particular - was broken on the wheel of Maastricht and the project for monetary union. Judging by the tone and content of Mr Blair's speech yesterday, his affair may not even begin if he becomes Prime Minister. Set aside the pro-European rhetoric and Mr Blair comes across in notably sceptical vein. "The truth is," he says, "that we have taken support for Europe far too much for granted". The popular backlash against current plans for integration, he suggests, is not confined to Britain.

Pointing to the absurdity that nearly half the European budget goes to finance the Common Agricultural Policy, Mr Blair serves notice that he will be resolute in standing up for British interests. The veto will be safe in his hands.

But it is his scepticism on European Monetary Union (EMU) that is most striking. Mr Blair echoes the concerns set out most cogently in February by Eddie George, the Governor of the Bank of England, about the need for real as well as monetary convergence. He acknowledges the fear that the decision to go ahead with EMU is to be "rushed through according to a timetable agreed by politicians rather than on a basis satisfactory to the real economic needs of the people".

That sets Mr Blair, as much as Mr Major, on collision course with EMU. For the plan for EMU - as with that of the single market - is precisely to use a timetable to push integration further forward. The first optional date in the timetable, 1997, may now have been abandoned. But the second date in the timetable, 1999, is mandatory on all countries that conform with the Maastricht criteria of monetary and fiscal convergence.

In Frankfurt, at the European Monetary Institute, precursor to the European central bank that will preside over monetary union, work is carrying on apace on the technicalities of EMU. Yves Thibauld de Silguy, the Economics Commissioner, is due to unveil the Commission's official plan for bringing a single currency to life. Mr Blair seems as worried by the tight timetable as Mr Major. Exercising the opt-out and missing the train may prove the more comfortable course for him, too.

Report on Barings has been delayed enough

Hindsight has that remarkable ability to turn events once dismissed as routine and unimportant into three-siren warning signals that should have been spotted even by a hard-of-hearing regulator on a foggy night. No doubt there will be a number of these detailed in the Bank of England's report into the collapse of Barings. One of them has leaked out early and on the face of it, it is pretty damning. Its implications for the Bank, and how it carried out its supervisory duties, are considerable.

Barings yesterday confirmed that it requested clarification from the Bank of England over a year before its collapse in February on the matter of transferring large amounts of money to finance its derivatives trading activities in Osaka and Singapore.

This is the fateful business that Nick Leeson, the Singapore-based trader credited with busting Barings, was principally engaged in. The clarification was needed because the sums involved exceeded the proportion of the bank's capital that Barings was allowed under the Banking Act to transfer to any one body. Even though the precise details of this request have still to come out, it is fair to surmise that the nature of the inquiry should have made the Bank of England inquisitive about the size of Barings' proprietary trading in Asia. Given the comparatively small capital base on which this was occurring, such activities could have been considered a matter for concern. Before the collapse, few in the City were aware that Barings was involved in trading on its own account on this sort of scale, if it all.

In the Bank of England, however, the request rang no alarm bells at all. Indeed, it lay in the pending tray for over a year. As such, it is one of the first potentially damaging pieces of evidence for the Bank to emerge so far. Until the report on the Barings inquiry is finally published, it will be difficult to suppress lingering suspicions that this secret investigation by the Bank into the Bank, despite insistence that the investigators are independent, will not be as ruthless or relentless as the situation warrants. That is all the more reason the Bank and the Treasury should stick to their latest date for publishing the report's findings in late July. This is the second delay. Let us hope it is the last.

The utility bosses have spoilt it for everyone

This is not perhaps the bridge too far, the instance of executive excess among the privatised utilities that guarantees the Government or its Labour successor will act over pay at the top. Regrettably for those that voluntarily keep their houses in order, that bridge was crossed long ago. None the less, a more ill-judged case of excess than that of Roger Farrance, even set against the legion of outrages it competes with, is hard to imagine and cannot pass without some comment. In the year he retired as chief executive of the Electricity Association, Mr Farrance apparently received a one-off bonus of pounds 536,047 on top of his basic salary of pounds 172,384. The bonus "related to the increase in value of a theoretical portfolio of shares in the UK electricity companies since their flotation in 1990 and 1991".

Few people had ever heard of the Electricity Association until this stinker of a bonus highlighted its existence; certainly nobody would think the job of running it could possibly justify that level of pay. Though funded and owned by the 12 regional electricity companies, the Electricity Association is a private organisation and the payment would probably never have come to light were it not for some enterprising chap digging around in Companies House records.

Having been discovered, the best response would perhaps have been to say: "It's a fair cop." Instead of which the association, which after all is only a trade body and as such does not generate value for shareholders, advances this wholly ridiculous justification. When the industry was privatised it was decided by the regional electricity companies to retain some functions in a centralised organisation, the Electricity Association. Mr Farrance was then deputy chairman of the Electricity Council and therefore one of the top people in the industry. He had already been approached to become chairman of one of the regional companies; to tempt him into the job at the association, a package of remuneration similar to that being awarded to executives in the privatised industry had to be offered. In other words there were not enough places at the trough and another had to be created.

The danger is that whichever route is chosen to curtail abuses of this type - legislative or tax - it will affect all top earners, whether they are at fault or not. By going too far, the utility bosses have spoilt it for everyone else.