Trickery used to meet EMU targets

Europhiles fight back: Treasury fights to meet currency criteria
The Treasury has been accused of using "tricks" to help keep the Budget deficit below the financial ceiling set for membership of the European single currency.

Economists estimate Continental-style "wheezes" have helped trim the figure for the Public Sector Borrowing Requirement by more than pounds 3.5bn. That is enough to reduce the government deficit as a share of GDP from 2.9 per cent - uncomfortably close to the 3 per cent Maastricht ceiling - to a relatively impressive 2.5 per cent.

The chief accounting ploys were classing the sale of the student loan book and the sale of Ministry of Defence homes, together worth pounds 2.2bn in 1997/98, as negative spending, reducing the Government's planned expenditure total.

"All governments are doing these things, and we are no different from the others. Perhaps just a little bit better," said Peter Warburton, an economist at Robert Fleming in the City of London.

But in a BBC radio interview earlier, Kenneth Clarke, Chancellor of the Exchequer, complained that other countries cheated as they tried to fit into the financial terms created for single currency membership.

"The public accounts of most countries have, I am sure, had jiggery pokery in them from time to time, certainly careful presentation - except of course that of Her Majesty's Treasury in this country...

"People have made the books look better by putting things in which don't count."

But one senior government source told the The Independent that it was accepted within the Treasury itself that some of its own accounting devices were "no good either".

In the Commons, Mr Clarke said at the start of a two-day debate on Europe that it was not enough to meet the single currency entry terms - "convergence criteria" - in just one particular year.

"They must demonstrate a credible commitment to durable and sustainable convergence. That is the key. That is what the Treaty says, and that is the basis on which decisions about who should join Economic and Monetary Union must be taken. It is certainly the basis upon which this Government would take its decisions and cast any votes at the relevant time."

In a powerful speech, the Chancellor tried to reassure the Tory sceptics - who continually intervened to inject doubt and concern about the threat of a federal Europe.

The hostility of his own side was made clear in interventions by a series of backbenchers - from the former Chancellor, Norman Lamont, Tony Marlow, Sir Peter Tapsell, Bill Cash and John Wilkinson.

The Shadow Chancellor, Gordon Brown, told the House that while Mr Clarke had spoken with enthusiasm, passion and conviction, the question was whether he was speaking for the Conservative Party, the Government, or the Prime Minister.

He pointed out that when the Chancellor had addressed the advantages of a single currency, there had been jeers from his own side; cheers when he had spoken of the disadvantages

While the Government has ensured that there should be no vote at the end of the two-day debate tonight, Tory rebels might take the opportunity of a vote on European fisheries policy, on Monday, to stage yet another protest against Europe.