[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Tuesday, 10 June, 2003, 11:31 GMT 12:31 UK
Hurry up and wait
Gordon Brown
Six years after he declared that the time of indecision on the Euro was over, the Chancellor of the Exchequer announced a time of more indecision.

The five tests he cooked up in the back of a taxi haven't been passed. He'll have another look at them next year. And so the saga goes on.

Jeremy Paxman spoke to the Chancellor in Downing Street. He began by asking him whether he was frustrated that the British economy had failed to meet the five tests.

GORDON BROWN:
It was sad that we hadn't made the progress that we wanted in certain areas but the important thing is we do meet the five tests. What people look to me to do is to show that we have stability in the economy, that we have done this rigorously and comprehensively, that we are not going to cut corners. People want to be sure that we've got this right. That is why I was able to report we had met the financial services test. The sustainable convergence and flexibility tests were not met. Had we met these two we probably would have met the other two tests.

PAXMAN:
You've had six years running the economy and you've not met your own five tests?

BROWN:
Because we have made a great deal of progress, first of all on interest rates, secondly on the convergence itself, thirdly on flexibility - but we have to do better. Fourthly on financial services. We have met the tests clearly. I think when you look at it, what has happened in the Euro area, is that what's happened in the first two or three years is the volatility of the inflation rates have shown that we probably need more flexibility than we thought originally, to be able to withstand the stresses and shocks that could happen in the Euro area. I believe we have made substantial progress over the last six years.

PAXMAN:
By what time will they have been met?

BROWN:
That is what we're going to review next year.

PAXMAN:
So you've had six years and you don't know when they'll be met?

BROWN:
We could have decided to set an arbitrary timetable, we could have said, "By X date we must have the results." I felt it was the right thing to do to say, "These are our objectives." Remember what sustainable convergence is - it is that you can live comfortably with a Euro area interest rate while maintaining high levels of growth and employment and funding your public services. To set an arbitrary timetable for that would be wrong but you've got to be sure that you can meet it.

PAXMAN:
According to the incoming governor of the Bank of England, it might take 200 or 300 years before you can judge.

BROWN:
No, that's not what he said. What he was talking about was whether you had identical business cycles. What WE are talking about is compatible business cycles. The governor of the Bank of England was asked whether he would have identical business cycles in all countries. That is not what we're seeking. We're seeking whether you can have compatible business cycles so you can comfortably live with Euro interest rates. It's not identical business cycles and it's not total or absolute flexibility. It is sufficient flexibility we're seeking.

PAXMAN:
You say you will assess whether there should be a further assessment in a year's time. Is this going to be become an annual event?

BROWN:
This is the right thing to do. I am not going to say it is going to become an annual event. It could be that next year we say there has been progress, we then have an assessment, if the assessment is yes, we would move to a referendum.

PAXMAN:
What if the assessment is no?

BROWN:
I will report back as to what the situation is for moving forward.

PAXMAN:
What will you do after that?

BROWN:
That is what I will report back next year and say.

PAXMAN:
This is a recipe for instability.

BROWN:
It is not a recipe for instability. There is a clear procedure being set down. We have done very well over the last six years. There is a lot more to do. We review it next year. I said today that I believe there is a realistic prospect of making significant progress but I am not going to give a running commentary at each stage of how we're going to meet each test.

PAXMAN:
You just promised a running commentary in a year's time.

BROWN:
No, I'm not going to give a running commentary today and tomorrow and say I believe each test will be met next year. We will review it next year. We will then report to people as to whether there is a case for another assessment.

PAXMAN:
But you've just conceded you don't know when these tests will be met.

BROWN:
We have not set an arbitrary timetable...

PAXMAN:
You set an arbitrary timetable in that next year you will reassess.

BROWN:
Hold on. I believe we can make significant progress but I am not going to say that we can definitely meet each test next year. A lot happens in the world. A lot happens in the interrelationship between monetary and fiscal policy, between convergence and flexibility. All these factors have to be taken into account. If I was to say to you I will meet the tests next year, you would say to me I had made a political decision to do so. It is an economic assessment that is being done. We have made the assessment this year as we made it in 1997. We will make another review next year. That is the right thing to do. I am not going to create an arbitrary timetable. The right thing to do is to make the assessment based on the progress you've got.

PAXMAN:
You say that the housing market in this country distorts things. How you going to stop it distorting things?

BROWN:
The thing that should be clear about this, when I talk about the housing market and the problems in relation to the Euro, I am not saying we should have an identical housing market with Netherlands or Germany or France. What I'm saying is there are inflationary pressures that have arisen from the housing market and these are inflationary pressures that we have to deal with. If you take America, what did they do when they had short-term mortgage problems? They securitised mortgages on a fixed-rate long-term basis. That is one of the things we can look at. Equally, we can look at other means by which we reduce the inflationary pressures arising from the mortgage market. What have we done over the last six years? You're asking, "Has there been progress?"

PAXMAN:
I was asking what you're doing in the future to stop the housing market distorting. For example, can I ask you practically - will you increase stamp duty?

BROWN:
We have no proposals to increase stamp duty.

PAXMAN:
Will you bring capital gains tax on housing?

BROWN:
Hold on, you've misunderstood the point here. On stamp duty it is being proposed as a regulator. It is quite different. Stamp duty could go down or up. We have made no decision. When we put before the British people a whole set of documents, what you are trying to do is to say we've made decisions on things.

PAXMAN:
No, I am not. You will understand everybody cares about the housing market in this country for obvious reasons. I am just asking what about capital gains tax on housing?

BROWN:
We have no proposals on that.

PAXMAN:
That doesn't necessarily mean you wouldn't do it?

BROWN:
We have no proposals for it.

PAXMAN:
You wouldn't do it?

BROWN:
We have no proposals for it.

PAXMAN:
That doesn't mean you wouldn't do it.

BROWN:
I said we've got no proposals.

PAXMAN:
Let us suppose you do manage to get within reach of your targets. Are you prepared to go out and canvass and persuade people that we really ought to join the Euro?

BROWN:
Yes, and the interesting thing is this. There are two issues in relation to the Euro. One is, would you be better off or worse off? That depends on us obviously being able to say the five tests are met. Secondly, what is preventing people being attracted towards the European Union as a whole? That is a whole undergrowth of prejudice against the EU and over the next few months, Tony Blair and I plan to take that argument. It is wrong that people are attacking the European Union for a number of things that it is not doing. Equally it is wrong for people to understand that every decision made in Brussels is against Britain. I believe we can win this argument, a global Europe, in other words, a Europe that is changing, British values changing that Europe. So people can see that the national self-interest is being reflected in decisions made in Europe as a result of British influence.

PAXMAN:
Do you want other senior members of your party to go out and campaign in favour of membership of the Euro?

BROWN:
Absolutely. We have always been in favour in principle of the Euro. We have got to meet the tests and we will review that next year.

PAXMAN:
When do you imagine the referendum might be held in your ideal world?

BROWN:
If there was a review next year that said there was progress and if, as a result of that, we triggered a further assessment then a referendum, if the result was yes, would follow. By the way, I have always said we would win a referendum despite what the opinion polls say if we could show that economically this was in the best interest of the country and I do believe we have made substantial progress over the last six years. It is wrong to say that is not the case, but I would be failing in my duty and my duty is to ensure stability for this economy, if I didn't say we have not yet got the convergence or the flexibility we need.

PAXMAN:
Chancellor, thank you.

This transcript was produced from the teletext subtitles that are generated live for Newsnight. It has been checked against the programme as broadcast, however Newsnight can accept no responsibility for any factual inaccuracies. We will be happy to correct serious errors.



WATCH AND LISTEN
Jeremy Paxman
asked Gordon Brown how much longer he's going to carry on dithering.



PRODUCTS AND SERVICES

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific