MONEY TALK Those dastardly Europeans will do us no harm

Clifford German
Sunday 23 October 2011 07:20

The threat a single European currency would pose to British national sovereignty or even British culture is one of those subjects guaranteed to generate more heat than light.

Euro-sceptics have worked themselves into a patriotic fervour over the prospect of decisions being taken by a centralised bureaucracy in Brussels rather than in London, although these are the same people who have encouraged the centralised bureaucracy in London to take powers away from local authorities all over the UK.

The antidote to bureaucracy, whatever flag it flies, is democracy, and if that means devolving some control over taxation to regional levels, it may be a small price to pay.

But the whole argument over a single currency is shot through with misunderstandings and misrepresentation. The pound is being used as a patriotic symbol when it is the value of a currency that really matters - not its name or even the face on its coins. The pound as a symbol of British economic performance and government financial management since 1945 has nothing much to be proud of.

Euro-sceptics argue that all this has miraculously changed, but sterling's recent strength is no guarantee that the UK has found the secret of economic efficiency just as the rest of Europe has lost it. Even if it has, there is no reason to believe the UK will be worse off as the economic heart of Europe than as an offshore island.

The argument that UK interest rates would have to rise inside a single currency ignores the evidence that they are above European levels anyway. Claims that the British government would lose the power to alter rates, stimulate the economy, and depreciate the currency to make UK goods more competitive are equally dubious. The people who say this are the same ones who want the right to control interest and exchange rates to be given to the Bank of England or left to the tender mercies of market forces.

It is also said that the UK would lose the right to decide its own tax levels. But even in a federal Europe, the individual states would be able to decide their own tax levels, subject only to the overall discipline of the Maastricht rules, which penalise excessive deficit spending. Those same rules also give the UK a permanent veto on weakening that discipline.

Another canard which has been given a free run is the claim that ultimately the UK would have to share the burden of providing pensions for elderly Europeans, and that the provident British who already have their own private pensions would be obliged to pay two or three times.

In fact, as a paper by Andrew Griffin, for Action Centre for Europe, points out, the Maastricht rules specifically prohibit individual countries from drawing on the finances of other countries and also firmly prohibit them from funding pensions through excessive borrowing and higher inflation.

In fact EU countries are already cutting state pensions and promoting private pensions. They are a decade behind us and they will have to start paying more for their own pensions. But that does not mean we will have to pay for them. On the contrary, the UK financial sector could blossom and flourish precisely by managing the financial services industries of our European partners.

q Steve Lodge is away.

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