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Simon Heffer



Wednesday: Simon Heffer

Simon Heffer
Simon Heffer answers your questions
 

Simon Heffer says: I have never been impressed by any argument about the European single currency other than those that address the fundamental issue of national sovereignty.

Some argue that the euro would make us worse off: others that it is the key to our future prosperity. For all I know either side may be right, though I suspect the former is nearer the mark.

But this issue is positively insignificant compared with what I thought was our inalienable right to govern ourselves.

You can only have a single currency if there is a single economic policy, administered by, effectively, a single chancellor of the exchequer.

What the euro promises is a zone where the key issues that must affect the exchange rate - notably interest rates - must be decided centrally. The person who will be making those key economic decisions at a European central bank will not be accountable to any electorate, nor under the control of any government.

Unemployment

Given how used the British people are to deciding elections according to economic performance, they are hardly likely to find this acceptable.

At the moment, if the economic policy of the governing party is unacceptable to the electorate, the electorate can throw (and often has thrown) it out at a general election. What, though, will the sanction be under a single currency?

If unemployment rises in our part of the zone for local reasons, there will be no scope for amending monetary policy to help ease the problem.

There will no point the electorate throwing out the party in power because the economy is going wrong because any party they might put in its place would be obliged to follow the same policies.

Democracy is thereby negated. We must then ask ourselves what the British people will do when they discover that how they vote can have no impact on how the economic policy of their country is conducted.

Parliamentary sovereignty

In other countries where the people are not allowed a say in such important issues they tend to riot and rebel until either they are allowed a say, or they are oppressed into silence. Would that be preferable here?

Some might argue that we have already lost parliamentary sovereignty over these questions by the decision to let the Governor of the Bank of England set the interest rate. That would be entirely specious.

The governor sets the interest rate according to an inflation target established for him by the Chancellor of the Exchequer, who is both elected and accountable.

It is a target suitable for the national economy, and not a one-size-fits-all target that will suit everyone from County Kerry to the Peloponnese. The British people are unlikely to tolerate economic hardship because it suits those in other lands with whom they have no emotional or cultural ties: but at the moment, they don't have to.

Even if it could be guaranteed that we would be twice as rich in ten years' time because of entering the euro, I still do not consider that to be a price worth paying for the loss of our important democratic rights.

At a time when politicians are wringing their hands about a lack of participation at elections, is it really sensible to strip parliament of some of its most vital powers, and pummel our democracy still further?

Do we really want our mortgage rates set in Frankfurt, with policies on taxation sure to follow? I think not.

And I suspect, if it comes to a vote, the British public will think not as well.

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BBC business reporter Dharshini David put your questions to Daily Mail columnist Simon Heffer. Here are the transcribed highlights.

DD:

Alistair Alexander, UK: National sovereignty is not considered such an issue in some areas of policy, such as foreign policy and defence – for example, we co-operate with NATO and also the UN. What is the difference between that and relinquishing some of our control over our economic policy?

Simon Heffer:

Our defence policy is very different from our economic policy. We went into NATO in the late 1940s after a war that we fought with our American allies and we went into NATO with them and with the people we had been fighting with – the West Germans. There was a general consensus in this country that we needed to protect ourselves against what was then perceived to be the enemy – the Soviet Union. That position held through the Cold War and it has held beyond the Cold War by dint of us absorbing people from Eastern Europe. So that is the pooling of sovereignty in one area and although defence policy is important, you can opt out of it quite easily – the French opted out of NATO.

There is also a great debate going on at the moment about whether we should have a European defence policy with a common European Defence Force and whether we should remain linked to the Americans. Now the Prime Minister appears to be trying to ride both horses. He is saying to President Bush this week – put your son of star wars missile at Fylingdales and that will be terrific but he is also saying the French that we want to be in the European defence system.

You can’t actually do both of them and at some stage we have to make a decision. If we have a common economic policy which you need to have with a single currency – it removes from the electorate in this country just about the most important thing that anybody votes on at a general election, which is how much money will I have in my pocket if I put a certain party into power.

The point that I tried to make when I was canvassing on Referendum Street was that when you go out and vote at an election, if you have a government you are not happy with you can go and vote for somebody else – it may not work and indeed you may get the same government again but you may get a government that comes in and does something radically different which is what you voted for. If we go into the euro, we don’t have that option anymore. Whatever party is in power in this country, we will have the same economic policy dictated to us from Brussels.

In fact we saw that only last week when Gordon Brown went to Brussels with Mr. McCreevy, the Irish Finance Minister. Mr McCreevy was rebuked for not raising taxes, Gordon Brown was told that his own spending plans, if we were in the euro, would violate our membership of the euro. Mr McCreevy asked why the Irish had been singled out for this – well they had been singled out for very good reason – they were the first country in the eurozone not to do what they were told. Even if you have one country, even one so small as Ireland, which only accounts for 1 per cent of GDP in Europe, breaking ranks with everybody else – it destabalises the entire zone.

If that sort of fuss is made when little Ireland behaves like this, just image if we were in the euro and Gordon Brown went and said, for example, I am not going to increase taxes, or allow a massive rise or fall in interest rates. He would have no choice but with such a large economy you have to do what we tell you. I think that would bring home to people of Britain at that stage that they had really lost something very important among their democratic rights.

With regard to foreign policy – we are a member of the Commonwealth – if we think back to the 1980s when Mrs Thatcher as the Prime Minister of the most important country in the Commonwealth said we are not going to have sanctions against South Africa and you could agree to differ on that as a foreign policy within club. But you can’t disagree on matters of economic policy if it is one currency and we lose our democratic rights if we go into it.

DD:

Peter Guegan, UK: The argument is made that variations in unemployment cannot be dealt with as effectively with a single currency then surely the point could be extrapolated to say that we should have regional currencies or tax systems for inner- cities and other deprived areas. Surely we should have a separate currency for Northern England because London and the South East probably has more in common with say Frankfurt than Sheffield. Would you agree?

Simon Heffer:

There is a difference in doing something within a multi-cultural community like the European Union and doing it within one nation like Britain. Britain has one electorate and whether you live in the North of England, Scotland, Northern Ireland or in the South East of England, you all have a vote and you vote for the same government and you vote to change policies among yourselves and everyone accepts that we have this national identity.

We do things as a nation and the government is accountable to parliament who are our representatives. I don’t think it is going to be quite so easy to say to the people of say, Ireland, you must raise taxes to take demand off the economy – you can’t adjust the interest rate because there is a common interest rate right across Europe therefore they want taxes put up and this is what Mr McCreevy, the finance minister, is getting very upset about it.

DD:

Surely the same argument applies here in the UK when last year or the year before, some parts of manufacturing were arguing – ‘Why do interest rates have to go up?’ – they are being penalised by a strong pound and rising interest rates just because people down in the South perhaps can’t stop spending.

Simon Heffer:

Back in the early 1990s when almost everybody who owned a house south of the Wash had negative equity and when we were in the ERM, with 15 per cent mortgage rates, there was very little negative equity in the North of England because people were not so over-mortgaged and property prices in those parts of the North of England were not so expensive. You could have argued then well that was fine but people in the South of England, aggrieved as they were by the interest rates, didn’t feel that they should have a differential interest rate compared with the North of England even though at that stage they were worse off. It was a question of national identity – we are all in this together.

Also we can all go and vote, everyone in the country, can go and vote at a general election and change the government if they don’t like the policy. There is not that community of interest right across the EU – you will not get people in Ireland saying that yes we will have to make sacrifices for the French or Germans. It is not a xenophobic or a racist question – the French and Germans are very fast to promote their own interests – that is what nations do.

DD:

John Brown, Belgium: You talked before an ill-fitting inflation target for the whole of Europe. But how is that any different from the idea of having a single inflation target for the whole of the US?

Simon Heffer

I remember during the great oil crisis in America in the 1980s, a lot of people in Texas were saying they wished to have their own currency there because they were in great poverty but there was 20 per cent interest rates in America and they didn’t need them there . But the Americans have a sense of nationhood. There are federal funds – they are all federal taxpayers and the money is moved around. But I don’t think the people in Britain or Ireland are necessarily willing at the moment to make huge economic sacrifices so that people in Greece and Portugal can have a good time.

DD:

Ken Brown, UK: In this era of greater political and economic integration, surely this country either stays in the EU becomes part of the euro zone and goes into full monetary union or joins up somehow with the US. Which one do you think will be the better choice – the US or Europe?

Simon Heffer:

Isolation I don’t think is an option – we live in a global economy and it would be stupid for anyone to say that we can have what is parodied as a little England policy. I don’t see why we can’t trade with everybody. When we went into the European Union 30 years ago I remember being told at the time that it was about free trade – that it was about a trading bloc giving favourable terms of trade to countries in Europe. Since Ted Heath told us all those things in 1971/72, the whole project appears to have expanded.

For centuries this country traded all over the world with other countries and I don’t remember that we had to have common currencies with any of those people in order to do this. Canada which is the next door neighbour of America, has its own currency and it does most of its trade with America.

The EU also gives the impression within the global economy of being an increasingly over-priced cartel and I am not sure I want to get locked into that over-priced cartel. I would much rather trade with America and with the emerging colonies in the Far East. I would rather explore trading with China, Taiwan etc – these economies are really taking off at the moment. I don’t want to be locked into an over-priced cartel trading with Europe. Also there is the old question – if it doesn’t work we can’t change it very easily – it means tearing up the whole of Europe.

DD:

Helen Loveless, UK: If we remain outside the euro zone then we are likely to see higher interest rates in the UK than if we do join the euro?… Interest rates are likely to be lower if we join, so wouldn’t that be an advantage for industry?

Simon Heffer:

I have never believed most economists – I came to this view in 1980/81 when 364 signed a letter to The Times saying that Thatcherism was going to be a disaster and that this country would basically be on its knees. In fact we had a second industrial revolution in this country within a few years, the basic tenets of which were so unanswerable that Gordon Brown adopted things hook-line-and-sinker when he became Chancellor of the Exchequer in 1997. So I don’t take what economists say terribly seriously.

Why should interest rates necessarily be higher because we are out of the euro? They are higher at the moment because we went into the last election with a very loose money supply – the last Conservative Chancellor, Kenneth Clarke, decided to spend more money, bribing the electorate, than he should of done in the years 1995/97.

The money supply was not controlled in the way that it should have been. If he had controlled money supply properly our interest rates would now be the same as they are in Europe. We are still getting rid of that legacy of over-spending. We have also a very stern inflation target that is a bit below the inflation target in Europe and that is why interest rates are higher. The benefit of that however, are that we have a very, very sound economy.

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