Pro-Europeanism was one of the defining issues of the project to modernise the Labour Party. It was a key policy change that symbolised the shift to a New Labour Party, younger, forward looking and in touch with the modern world.
Gordon Brown will be aware of the wider totemic significance of the decision he is about to take on the euro. He was part of the leadership of modernisation at all its stages. He knows his decision will be seen not just as a matter of processing technical criteria but as a demonstration of whether New Labour is still the pro-European party.
In the six years since Gordon Brown set out the Government's position on the euro, the economic arguments have tilted further in favour of joining. If he needs convincing, he need only read the authoritative analysis published today by Professor David Begg and 10 other European and US economists.
Since the creation of the euro, foreign direct investment in the UK has dropped so dramatically that our share within the EU has more than halved. Companies that collectively invest billions of dollars in fixed plant do not see why they should saddle themselves with the penalties of exchange rate uncertainty and transaction costs that come with investing outside the eurozone.
Moreover, the single currency has stimulated a faster growth in trade between the members of the euro- zone than in trade between the UK and the eurozone. To the extent that the currency barrier limits growth in UK trade, it also limits investment, competition and productivity.
And while the case for joining the euro has strengthened, the obstacles to membership have weakened. UK inflation and long-term interest rates have substantially converged with those of the eurozone; and the pound has depreciated by over 10 per cent against the euro over the past year, bringing it close to a reasonable parity at which to join.
It is touching that some Tories still cling to a separate currency as a symbol of independence. But it is a hopelessly confused attitude from politicians who like to proclaim the supremacy of market economics. It is the financial markets not the national politicians who now settle currency rates. A trillion dollars a day are traded over foreign exchange markets. No single government has the resources to take on speculation on the contemporary scale. The only hope of guaranteeing price stability to our exporters is by a single currency with the European markets that purchase the clear majority of our exports.
The economic case for joining the euro is now compelling. Perversely, over the same period in which the economic advantages have strengthened, the political barrier has got higher.
A year ago, I warned Tony Blair that he could not follow George Bush into Iraq and at the same time ask the British people to follow him into the euro. The opinion polls confirm that the predictable public rift with France and Germany has made it more challenging to ask Britain to vote for greater integration with those partners. We have pursued a US political priority in Iraq at a cost to British interests in Europe.
Yet a decision to postpone membership indefinitely would compound the penalties of being outside the eurozone. Throughout the lifetime of the euro it has been widely assumed that Britain would join when the time was right. A failure now to commit ourselves to membership would lose Britain its unique status as a pre-in and reduce us to a definite out.
At that point our partners will stop wedging the door open for us. Those partners are about to conduct major renovation of the architecture of the euro. The stability and growth pact, which was intended as a basis for monetary and fiscal discipline within the eurozone, is a prime candidate for reconstruction. Gordon Brown has much to contribute to the process, but no member of the eurozone is going to listen to our Chancellor if the Government has just ruled out Britain becoming a member.
If Gordon Brown does rise in Parliament to announce that this is not yet the perfect time for Britain to join the euro, what will be crucial is the next paragraph about our future intentions. It needs to send a positive message to investors, to domestic supporters and to European partners that this Labour government is the one that will put Britain at the core of Europe.
The best solution would be to adopt an option outlined by the Treasury Select Committee, and announce a fixed date in the future when the UK will join the euro.
Gordon Brown could say something like this: "This Government understands that Britain's economic prosperity and political standing would be best served by membership of the euro. We therefore commit ourselves to making it possible for Britain to join the euro in January 2007. To the extent that our economic tests are not met today we undertake to make it a priority of our economic strategy to ensure that they are met by then. We will put the case for the euro with vigour and conviction to the British people in a referendum before that date.''
Such a statement would redress the negative impact of announcing that we cannot proceed now because one-and-a-half or so of the fabled five tests have not been met. It was the Prime Minister, who will be sitting next to Gordon Brown on the Treasury bench, who once promised that we are at our best when we are at our boldest. Now is the time for the Government to be bold on the euro.
The writer is a former foreign secretary
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies