He only offers in evidence the trade deficit during a slump and thinks that a 10 per cent devaluation would put us right. He and others like him ignore the drop in wage awards from 9 per cent to 4 per cent since we joined the European exchange rate mechanism (ERM); the first time those round the bargaining table have recognised that they are negotiating in a hard currency.
If we throw this hard-won credibility away by devaluation, we will take years to regain it. And, since it lowers industrial costs by 5 per cent, we have already gone halfway to the alleged 10 per cent overvaluation, but without the increase in import prices that would restart the wage-price spiral.
But the present pressure on the pound and the unacceptable level of interest rates shows that the ERM is not enough. The ERM is overdependent on the mark and the Germans have decided to finance unemployment pay in the five new Lander by borrowing and not by taxes. That is why we need the Economic and Monetary Union that the Maastricht treaty proposes.
We have a special problem because we have never recovered the share of industrial capacity that we lost when the pound really was overvalued in the early Eighties. That is why we above all need a stable and credible currency as a basis for industrial investment.
In my three decades of public life, Britain has been blighted by the wage-price spiral and short- term economic policies. Now, for the first time, we have a long-term strategy that should put us
on level terms, and even if the French send us back to the drawing board, that is still the strong British interest.
Fortunately, we have a government that has just been elected and which is going to stick to its guns.
MEP for Cambridge and
North Bedfordshire (Con)
26 AugustReuse content