Brown spells out plans to shadow the single currency
British business will be operating a shadow currency to the euro when EMU starts in 1999. Gordon Brown, Chancellor of the Exchequer, yesterday spelt out the extent to which the euro will become the common currency of business as the debate raged over mone
Tuesday 11 November 1997
The moves will be seen by Euro-sceptics as further evidence of how Britain will shadow the single currency to the point of de facto adoption, while remaining outside the first wave of member states.
The measures are the clearest indication yet of the Blair administration's belief in the merits of EMU and its determination to ensure British business is not disadvantaged, even though the pound will not enter until 2002 at the earliest. The DTI is to consult business on the possibility of amending the Companies Act to make it easier for British firms to issue shares in euros and convert existing shares to euros. Companies will also be able to file accounts in euros and set up bank accounts in the currency.
Adair Turner, director general of the CBI, said that adoption of the euro by business would have "a pervasive effect on public opinion". Provided it was a success then it would push opinion in favour of a single currency.
The Government also plans to give selected banks a "seal of approval" enabling customers to select ones that permit accounts to be operated in euros without punitive charges. Other legislative steps are also being examined, said Mr Brown, to make the euro easier for firms to use. The measures, he added, formed part of the Government's "prepare and then decide" strategy on EMU.
"In less than 14 months from now a German business selling products to France or the Netherlands will be able to do so without exchange rate risk, with lower transaction costs and with more transparent prices, something that in itself will pose a big challenge to a British competitor hoping to supply the same order," the Chancellor said.
That was why it so vital to begin preparations now for the single currency. These preparations, he added, were "too important to leave to dogma or internal party politics and too important to leave aside for years more of indecision and drift."
The advisory group of business leaders, trade unions and consumer groups set up to advise the Government on EMU preparations will report to Mr Brown in December and he will publish its findings in the New Year. There will then follow a series of conferences throughout the country to make businesses aware of the practical steps that need to be taken.
Meanwhile, the Treasury yesterday sent out information packs to Britain's top 1,000 firms detailing business preparations for the euro. "We have moved from talking about preparations to making them in practice," the Chancellor told his audience.
Separately, Wim Duisenberg, the Dutch president of the European Monetary Institute and one of the frontrunners to chair the European Central Bank, indicated that Britain would not necessarily have to rejoin the Exchange Rate Mechanism as a precursor to entering the single currency. He said there were other ways of demonstrating stability and said it remained essential that UK economic policies were aimed at further convergence.
William Hague, the Tory leader, entered the conference prepared for a "bare-knuckle fight" with the CBI over his party's opposition to the single currency and walked out with the loudest and longest ovation of all. On a day when economic and monetary union totally dominated debate, everyone from the Spice Girls to Ted Heath got a mention as the arguments over Europe swung one way and then another.
Employing some of the most uncompromising language heard at a CBI conference since Sir Terence Beckett's famous challenge to Mrs Thatcher in 1980, Mr Hague painted an image of financial and social ruin if Britain were to enter EMU.
A single currency, he warned, could mean employees having to accept cuts in wages for the first time since the Great Depression as vicious unemployment black-spots sprang up across the continent. His party, he said, had paid the political price for Britain's humiliating exit from the Exchange Rate Mechanism on Black Wednesday and had apologised to the millions of people who had lost their jobs, their homes and their businesses. "I have apologised for the ERM. I never want to apologise again for following the dictates of fashion."
Mr Hague went on to dismiss the arguments of the pro-European lobby that Britain could not afford to be out of a single currency if the rest of Europe went ahead. "The danger for Britain is not that we will somehow be left behind in Europe. The real danger for us is that Europe could be left behind in the rest of the world."
The Tory leader conjured up an image of the straitjacket of a single currency binding Britain into a world of uncompetitive, inflexible, bureaucratic labour markets, outpriced and outperformed by the rest of the world and incapable of adjusting interest rates to accommodate domestic economic conditions.
"Unlike the ERM the single currency is for all time. British business could find itself trapped in a burning building with no exits. British business needs a hard-headed assessment of the risks involved in a single currency before we consider joining it. And that assessment is only just beginning," he said.
Mr Hague said that EMU supporters pointed to the US as an example of a successful single currency but this ignored the fact that there was a high degree of labour mobility in America while the Government could automatically transfer billions of dollars from prosperous to poor states through federal taxation and expenditure. By contrast Britain had "a long way to go before we can say to people: get on your hovercraft and look for work".
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