POLITICAL COMMENTARY : The plain fact is we cannot stop a single currency

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The Independent Online
Typecasting is as much a feature of British public life as it is of our television serials. Mr Kenneth Clarke has been cast as the man with the pint and the small cigar in the saloon bar, quite unafraid to cause offence when that is necessary or, indeed, when it is not. A good man to have on your side, Ken: lots of guts, quick on his pins, yet with a big punch nevertheless. But he is not customarily esteemed for his cerebral qualities. He is not regarded in the same way, as, say, his fellow Europhile, Mr Douglas Hurd.

I have spent the past few days reading the most recent speeches by Mr Clarke, by Mr Hurd, who has been notably prolific lately, and by other ministers, including Mr John Major, on a single European currency. The experience was instructive but not amusing. I have also watched a replay of Mr Jonathan Aitken on television on 5 February. This was slightly funnier. He said:

"I don't want to see a single currency. Period. For as far as I can possibly foresee. I would hesitate for an eternity before I came out and said I would vote for a single currency."

This was similar to what Mr Michael Portillo said on 1 May:

"Single currency would mean giving up the government of the UK. No British government can give that up. It's impossible."

On Thursday Mr Clarke denied this. In the most original intellectual contribution to the debate so far, he said:

"It is quite possible to have monetary union without political union. It is a mistake to believe that a monetary union need be a huge step on the path to a federal Europe."

He went on to point out that the Austrian schilling had been fixed against the German mark for 13 years and that Dutch short-term interest rates had not diverged from German rates by more than under 1 per cent in eight years. Yet nobody, Mr Clarke continued, would deny that Austria and The Netherlands were sovereign states.

He might have added the example of Northern Ireland in the 50 years before the abolition of Stormont and the imposition of direct rule in 1972. Northern Ireland had a single currency with the rest of Britain. Nominally it was - as it still is - a constituent part of a single sovereign state. In practice it was treated differently from Scotland, as Scotland (with its own legal system and established church) was and continues to be treated differently from Wales. Northern Ireland possessed many of the appurtenances of a sovereign state: a legislature, a prime minister, a lord chief justice. Its young men were not conscripted into the armed forces of the Crown. Until 1977 it had disproportionately few members of the sovereign parliament at Westminster, whose British members were prohibited by a Speaker's ruling from discussing its internal affairs.

Well, perhaps this would have been a tricky one for Mr Clarke to handle, what with one thing and another. Instead he contented himself with observing that the European Community had "always involved some pooling of sovereignty". But the "possible addition to this pool" of the decisions which he and Mr Eddie George of the Bank of England now took "on the level of our interest rates would not herald the end of the nation state".

The first part of what Mr Clarke said is true enough. I am not sure, however, that I should describe what had happened as a pooling of sovereignty. "Pooling" suggests some kind of democratic kitty.

For some reason, about two-thirds of Conservative backbenchers, a third of the Cabinet and all the leader-writers of the Fogey Press find it impossible to get it into their noddles that by passing the European Communities Act 1972 we surrendered the sovereignty of the Queen in Parliament. This may have been a good thing, a bad thing or an in-between sort of thing, with much to be said on either side. But there is no doubt that it happened, and produces consequences virtually weekly, which may be to people's taste or not, depending on their attitude to the particular case and to Europe generally.

Community law is distinct from national law but exists alongside it. When Community law is in conflict with national law, the former prevails. In the 1972 Act the UK accepted the binding authority of the rulings made by the European Court. The court has laid down that no parliament of a Community member can legislate inconsistently with Community law. That principle has been regularly applied by the courts of the UK.

In these circumstances it is a little babyish for the Daily Mail to demand that Community law should no longer apply to the UK. Parliament can repeal the 1972 Act, just as it can any other. But if it were to do so we should have expelled ourselves from the Community.

The second part of what Mr Clarke said is more questionable. The publication of the minutes of the discussions between the Chancellor and the Governor of the Bank of England is the most important constitutional and financial innovation of the 1990s. Publication partly depoliticises such matters as the rate of interest, in the sense that it displays the arguments of a politician with a banker. In another sense these arguments can never be non-political, for rates of interest, and of inflation, benefit certain sections of society as they hurt others. Mr Clarke says that there is no fundamental difference between having these discussions in Brussels, Frankfurt or wherever it may be and having them in London.

In addition to making this original contribution to the debate, Mr Clarke is, in default of aligning currencies, trying to align himself with his colleagues. The Maastricht Treaty, he said, was a document which rightly emphasised "nominal convergence". The treaty was based on a belief, which he shared, that a single currency could work only if "nominal convergence criteria" - concerning government debt, budget deficits, inflation and interest rates - were satisfied in full. But, "as the Prime Minister reiterated last week", these were "necessary but not sufficient".

Ah, our old friends, necessary and sufficient! You have to have A-levels to get away with talking about them. Mr Major, as far as one knows, does not, but this does not deter him. He says, as to sufficient conditions, that "the plain fact" is that the "powerful forces of free markets" will determine when a single currency comes into existence. The circumstances cannot accurately be foreseen now.

A close reading of his recent speeches, together with Mr Clarke's and Mr Hurd's, suggests that what the Government is trying to do is announce a period of delay not merely for the UK but for the other European states as well. But they cannot do this. They think they are still running the Empire. Let me remind them of what the treaty actually says:

"All member states shall, whether they fulfil the necessary conditions for the adoption of a single currency or not, respect the will for the Community to enter into the third stage [of economic and monetary union], and therefore no member state shall prevent the entering into the third stage."

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