Christopher Walker: Tony ­ watch Gordon and be bold on the euro

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The Independent Online

Focus group memo to No 10: Prime Minister, your second administration provides a unique opportunity to influence the course of British history. I know you have been canvassing opinions in the past few months from various interest groups. Here is what I believe should be the priorities for the business and financial communities.

Leaving aside new initiatives, such as the granting of independence to the Bank England, much of the last four years was spent unpicking Tory policies. In this administration you can be far bolder.

The election campaign caused barely a ripple in financial markets, largely because a Labour victory was obvious from the outset. This all changed in the last two days, as it became clear that your greatly increased majority could lead to the acceleration of euro membership.

The effect was seen in two ways: a weakening of sterling in the currency markets and a rally in manufacturing stocks. The former was seized on by the Eurosceptics as evidence of investor hostility to the idea. This is nonsense ­ it was rather a market judgement that we would wish to go in at a more competitive rate than at present. This was why the second effect occurred. Shareholders realised there could be welcome relief for our hard-pressed manufacturing industry.

I believe early entry to the euro is vital to Britain's economic and diplomatic interests. This must be the major goal of the second term.

I know social legislation is central to your own ambitions. Incidentally, note that more public reference to the beneficial impact of European influence in this regard will also help with the euro project. After all, the introduction of the minimum wage and the protection of women's pregnancy work rights have their origin in the European community.

It is arguable that in creating a fairer, more open society, some price would have been worth paying, but the predicted negative effect of these measures on industry did not happen. Anyway, I also believe it is only a socially responsible society which will be economically successful. We laugh at the social restrictions France imposes on business, and yet it has the fastest growth rate in Europe.

Gordon needs watching. I have spoken before of his sado-monetarism. The Chancellor clearly believes that it is better to receive than to give. The planned increases in public spending on health and education are vital after decades of under-investment. But at the same time, your new government must come up with answers as to what it will do if economic growth falters and the money simply isn't there.

I fear Gordon would happily raise taxes. This would be a mistake. The International Institute for Management Development has drawn attention to Britain's reduced international competitiveness. Britain is now ranked last ­ yes, last, Prime Minister ­ out of the 49 countries surveyed. This was found to be because of our taxes on property and capital.

The only flicker in your opinion poll ratings during the campaign came when the Tories began their tax attack. The big rise in stamp duty on house purchases is affecting every middle-class home owner who deals in the South-east property market. It is no good Gordon pointing to continental comparisons. There, stamp duty is on sales, not purchase, and therefore paid out of profits, not out of the deposit.

Tax remains the Labour party's Achilles heel. It has most potential to deprive you of a third term.

If Gordon really wants to be radical then he should direct his firepower at the rich tax evaders. Quite simply, many of the rich do not pay taxes. Attack them rather than the high wage earners. Britain needs the wealth they generate. Under Mr Bush, the United States will have even lower taxes. The professional class there will earn even more than their UK equivalent. It would be unthinkable if we were to allow a repeat of the brain drain of the 1970s.

This is not to deny the urgent need to reduce the social divide. This is compounded by the geographical division which is now so great between the South-east and the rest of the UK. Why not be bold and consider engineering a regional revival through an extension of your devolution policy. Edinburgh is booming since devolution. Let's see the same happen in Birmingham, Manchester and Newcastle.

Mr Blair, business has accepted your party as the safest pair of hands for the economy. This is a staggering achievement. In your second term, you must not lose this confidence. Please cure the social divide ­ but do this by raising the living standard of those left out in the recent boom. Not by lowering standards of the ones who have done well.

Good luck.