A member of the Bank of England's Monetary Policy Committee and a former senior Treasury official are among the members of a committee of experts being set up by the Liberal Democrats to recommend measures needed for Britain to join the euro. The most important of these will be tackling the strong pound.
The announcement of the high-level committee came as Gordon Brown said the weakness of the euro against the pound, as he described it, did not reflect economic fundamentals. But he said economic stability could not be sacrificed to achieve a more favourable exchange rate in the short term, despite the problems it posed for exporters.
Speaking at the London School of Economics yesterday evening, the Chancellor said: "I understand the great difficulties that the current fall in the euro is causing for British industry." But he added: "Manufacturers, who have suffered from the old boom-and-bust and short-term policy lurches, which all too often went wrong, would also reject a return to short-term, quick-fixes."
Charles Kennedy, the Liberal Democrat leader, accused the Chancellor of failing to address the crisis in manufacturing caused by the overvalued pound. He said that the new group of experts would draw up a realistic policy to achieve entry to the single currency and boost British industry. The 12-person group includes Willem Buiter, who steps down from the MPC at the end of this month, and David Peretz, who was deputy director of the Treasury's international finance division. Other leading economists such as Martin Weale, the head of the National Institute for Economic and Social Research, and Richard Portes, Professor of Economics at the London Business School, are among its members. It will be chaired by Chris Huhne, a Liberal Democrat MEP. Mr Huhne said that simply by entering into negotiations on joining the euro, Britain would trim some of sterling's excess strength.
Mr Weale said: "One of the obvious questions is, if the Government were to take a more positive attitude towards joining the single currency, whether that would be likely to affect the exchange rate."
The committee would also look at whether the Government could take some of the pressure off interest rates by using fiscal policy to cool the economy, he said. The Chancellor has cooled towards UK membership of the euro. He did not attend yesterday's meeting of finance ministers in Brussels where the weakness of the currency was discussed. In his speech last night, Mr Brown pledged a new drive for improvements in UK productivity. He said further economic reforms to boost competition and enterprise would be announced in November's Pre-Budget Report. He said: "We are examining how we can further promote the best competitive environment for industry and consumers alike."
Mr Brown also confirmed that Paul Myners, the executive chairman of the Gartmore fund management group, would carry out a review of institutional investment to ensure there were no unnecessary barriers causing under-investment. This report would be completed in time for action in next year's Budget and an initial consultation document will be published next week.Reuse content