Had Kenneth Clarke been entirely candid, he would have drawn attention to the reverse double whammy which the unconfessed failure of the exchange- rate mechanism (ERM) continues to inflict on the long-suffering but now angry British (and Conservative) voters. What has happened is that our commitment to this policy in our 1992 election manifesto virtually destroyed our economy, with the collusion and complicity of the Labour and Liberal Democrat parties. We could and should have come out of the system long before September 1992, by which time we had gambled away, for the sake of pride, billions in taxpayers'money, estimated by some as well in excess of £10bn.
In the meantime, the massive hike in interest rates, social security payments, mortgage relief and unemployment, not to mention bankruptcies and the loss of businesses and homes, led to an impossible £50bn public sector borrowing requirement. This led to a substantial increase in taxation, including the deeply unpopular proposals for VAT on gas and fuel which infuriated traditional Conservative supporters. Many of these are still trapped by their mortgages, burdened with so-called "negative equity".
This is made worse by the tax increases themselves, a litany of broken promises that puts even further pressure on individual domestic budgets.
What, therefore, should the Chancellor of the Exchequer say and do? The first thing is to repudiate the ERM for good. The second is to admit that it was all a ghastly mistake and follow this up with an equal repudiation of the principle of a single currency. We should go back to the essentials of Tory economics - the creation of wealth and enterprise, for it is only the fair taxation of wealth and enterprise that enable the financing of public expenditure.
The Labour Party and Liberal Democrats are committed to a single currency. Yet a single currency is hopelessly entwined with the Maastricht requirement for a European Central Bank. The Central Bank involves handing over to unaccountable, unsackable bankers the setting of interest rates and the running of an economy according to the Maastricht convergence criteria and without reference back toBritish voters. It would set budget deficits beyond our control. This would put severe restrictions on the free choice of the voters in matters such as the provision of hospitals, education, social services and defence.
It is widely recognised by the Governor of the Bank of England and even by the European Commission that these criteria involve massive risks for unemployment, from which Labour and the Liberal Democrats, with their commitment to the Social Chapter, refuse to distance themselves. The Chancellor is unlikely to shift his ground from this perilous inclination to believe there is virtue in these crazy ideas. His continuing failure to do so is the basis of calls for his resignation. If he did shift tack, he could save his own fortunes and those of the Conservative Party and put us on a path to prosperity, based not only on the realities of a reformed single market but more so on our potential in the ever-expanding global marketplace.
The feel-good factor could be realised well before the next general election.
The writer is MP for Stafford and chairman of the European Foundation.Reuse content