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Austin Mitchell


Monday: Austin Mitchell

Austin Mitchell
The Labour MP for Grimsby answers your questions.
 

Austin Mitchell says: The euro is a political not an economic instrument. Its purpose, to build ever closer unity, undermines British democracy.

Control of economic policy is transferred from our elected government to bankers in Frankfurt so that the government no longer runs our economy for the purposes of our people.

If it all goes wrong, the people can't change policy by throwing out the government.

Threat to jobs

These political purposes would be achieved at the cost of economic damage. We trade more with the rest of the world, but the euro would force us to trade more with the EU where we trade at a disadvantage and at a deficit. Euro enthusiasts are ready to accept this and the resulting threat to jobs to advance European Union. I'm not.

We need to manage our interest and exchange rates to maintain competitiveness, both in the Single Market and outside it. One interest rate can't fit every European country.

Workers hit by unemployment can't move to where the jobs are. Europe has no system of financial redistribution to help areas hit by the single currency. Its money is mainly predicated to Agriculture. So it's all a huge risk.

BBC Business reporter Dharshini David put some of your questions to Austin Mitchell MP. Here are the transcribed highlights.

Dharshini David:

Andrew, from the UK says your views appear incompatible with those of some of your government colleagues such as Stephen Byers and Robin Cook. How many other Labour MPs actually share your views on the single currency?

Austin Mitchell:

I don't think I am out of line actually. My views are in accord with the views, as reported in the opinion polls, of most Labour members and of the great majority of people who vote Labour. So I am in tune with them - not necessarily with the leadership but then the leadership's position is "wait and see" in other words they don't think we can go in now and I strongly agree on that although the programme last night indicated we could go in now but I think that is crazy. But I think the most important point is that Labour represents ordinary people, working people, the less well-off sections of society and if it goes wrong, as it well might, they are the ones that are going to suffer from the loss of jobs and from the cuts in public spending which the euro will require. It will help the multi-nationals - it will help anybody who is powerful and has interests in several countries - it will help them to shed jobs in this country probably - but it won't help ordinary people, I represent them.

DD:

So what you are saying is that it is good news for the companies and bad news for the person on the street.

Austin Mitchell:

Good news for big companies not for small companies - the costs are going to be huge for small companies and I don't think they want it particularly.

DD:

Well they don't and that is what the opinion polls seem to be telling us at the moment and certainly even the CBI seem to have fairly mixed views on this. Going back to the ordinary person - as you said you represent people in the street, hardworking people with salaries and paying taxes. We have a question from Mike Cook in England: As one of the lower-paid workers, earning perhaps around 10,000 a year - should I fear joining the single currency?

Austin Mitchell:

Well I think he should fear joining the single currency. One thing that really wasn't talked about in the programme and isn't talked about by the Government - that is the rate at which we go in - because if we go in at too higher rate, as we did into the Exchange Rate Mechanism ten years ago, then all industry can do is try and cut its costs, fire people, shed labour, shed investment to stay competitive because it is tied in at too high an exchange rate and it is not competitive and the euro would make that loss of competitiveness permanent. So I think there is a problem to living savings, to wages and to jobs if we go in at a high rate and at the moment the rate is much than it was when we went into the ERM - and everybody agrees that was far too high - it is higher now.

DD:

So what would you say is a suitable rate? As you say it is at quite a high rate at the moment?

Austin Mitchell:

Well I would estimate that the pound is about 30 per cent over-valued and this is having disastrous effects - that we are seeing closures in Corus and Vauxhall at Luton. Just this week I have seen closures in my constituency - 200 jobs lost in a textile firm - there has been massive closures in textiles.

The pound is too high - partly too high because the euro is not a stable currency - it has gone down 20 per cent since it was started - now you can't call that stability. That fall in the euro plus the rise in the pound means that British industry is now competing in a very disastrous competitive situation.

DD:

Most manufacturers would like to agree with you on that point I think. Nick from the UK would like to know what happens next? How long is it before Britain suddenly decides that in fact maybe it has been mistake and that perhaps we have to pull out?

Austin Mitchell:

I don't know. Clearly the opinion polls tell us that a lot of people in Germany think it has been a mistake and they would like to come out. But we always can come out - the Europeans say that entry is irrevocable and permanent. In fact the basic principle on which the constitution of this country works is that Parliament can't bind itself. So one parliament can go in and another parliament can decide to come out so we aren't in there permanently if we don't like it.

DD:

I guess we will have to wait and see for that one. Allan Dean, from the UK asks shouldn't there be greater political and economic co-operation in the 21st century. Now if we take your arguments to the extreme, then that suggests that perhaps say even Essex and Yorkshire should have separate currencies. Would you agree with that?

Austin Mitchell:

Well I want regional government for Yorkshire - it is certainly true. I want federalism in this country but there is no reason why just to co-operate with European countries, which we can in any way we want to, we have to join the euro. They have a single market in North America - the North American Free Trade Area - and they don't have the same currencies. Indeed, the only way that a country which isn't competitive in a single market can survive - can meet the competition - is by adjusting its currency - usually downwards - as the Canadians have their dollar and the Mexicans have their pesos.

DD:

But what about this argument that says that if the currency was fixed there is less uncertainty for companies, big and small, and that helps them to plan better - plan their investment - and to grow further in the longer term?

Austin Mitchell:

Tell that to the European countries who have seen the euro fall by about 20 per cent. I can't see what value that is to long-term planning. Countries can always hedge their exchange rate - it is not very expensive to do that. What an industrial economy needs is a competitive exchange rate and one that is suitable for its purposes in the market it trades in, not which is decided elsewhere. We trade a lot more outside Europe so we want therefore to be able to adjust with the dollar and not just be tied into the European market where we are actually trading at a deficit - we have got to be able to balance things. The other European countries trade more with each other.

DD:

Pauline in New Zealand: Who stands to benefit the most then if the UK actually does relinquish control over its economic management?

Austin Mitchell:

Primarily multi-nationals and big business because they can straddle several countries and handle their internal currency transactions in euros - the big boys. I think the Europeans stand to benefit because it will help them gain a better access to our markets. The people who stand to suffer are the less well off, the poor, the workers who are threatened with losing jobs and small business which is going to have to carry a considerable amount of costs of renewing all its accounting equipment etc. A huge cost - around about 39 billion for the whole economy - for no great gain because they will continue to trade mainly inside this country - so scale benefits - small loses out.

DD:

So it is basically bad news for the individual. Robin Prior, US : If the British taxpayers knew that they actually may have more money in their pockets for example from the fact that interest rates tend to be lower on the continent and we could have lower mortgage bills, then surely people might vote in favour of the single currency because they think they are probably going to better off. Would you agree?

Austin Mitchell:

Yes and along with proper training, pigs might be able to fly! There is no reason to assume that interest rates will be lower. They are now because they want a competitive exchange rate against us but that is not always going to be case. For instance, they are much too low for the purposes of the Irish economy where they have got galloping inflation and want interest rates up and can't put them up - so interest rates will rise and fall depending on circumstances. If our American friend thinks as he does - why don't Canada and Mexico have the same interest rates and the same exchange rate as the US? He should ask himself that.

DD:

There are two things that governments always get blamed for: interest rates and taxes. R. Frankel, UK: If we join the euro, what does it mean for our taxes? Do we need to see harmonisation of things like VAT, income tax, corporation tax and If so are we likely to suffer here?

Austin Mitchell:

Well probably. They are indicating that taxes will have to be brought into line with European taxes. That means that the advantage we have from lower tax which they say is an unfair competitive device, might well have to go. I don't know - that is up to argument. But there is a lot of pressure in Europe to align taxes and that will fall on us just as it is falling on the Irish at the moment, if we are in the euro. I think one effect will be that public spending will have to be cut because the Maastricht treaty and the processes of putting the euro together do require cuts in government borrowing and government spending. We are seeing privatisation, we are seeing cuts in social spending in the European economies that might well have to follow through here because it is making them more competitive if they do that. We are going to have to trim both our taxes and our public spending to a degree to their purposes if we are in.

DD

John Baxter-Smith, UK: How much would it actually cost us to change over to the euro if we were to go into the single currency?

Austin Mitchell:

Nobody really knows. The Trade and Industry Committee has done an estimate and the Treasury Committee has tried an estimate - figure that sticks in my mind is about 39 billion for the cost of all the re-equipment that would be necessary. But I don't know and these forecasts always turn out to be bigger in the end - like the cost of the Dome.

DD:

Colin Murphy, UK: Can we actually be part of the EU and not sign up for the euro? Surely it would be better for us to come out of Europe altogether - would you agree?

Austin Mitchell:

I think we could certainly come out and we would actually benefit from coming out but that isn't part of the political argument at the moment. What we are saying is "thus far and no further". The euro is really a political instrument for building a united Europe because if you have got one currency you then need the institutions to run it and the parliament to control those institutions and it just a remorseless process of building a new nation. Well I don't want to go along with that.

DD:

What are the disadvantages to us of staying outside the single currency? Can you outline any?

Austin Mitchell:

Well there aren't any. We are free to decide things for ourselves. At the moment government runs the economy - along with the Bank of England - and if the people don't like what happens in consequence they throw out the government - as the Tories were thrown out in 1997. With the single currency they can't do that because the decisions are taken by bankers - unelected bankers in Frankfurt. That is not democracy - that is plutocracy.

DD:

Even if the economic conditions are right a lot people argue that the biggest obstacle facing the Government is public opinion. What if anything is going to change that? Do you think the majority is going to stay with you?

Austin Mitchell:

I think the referendum programme will give supporters of the euro great hope that the people can be persuaded to vote for the euro because a majority against membership was turned into a majority in favour in membership by that intensive canvassing. I don't think the referendum will actually be like that but it indicates that opinion aren't firm and strong - people are open to persuasion. But if I and those that agree with me that we shouldn't go into the euro argue strenuously, then we have a chance too of reinforcing the hostility to it.

I think the Government is best sticking to its policy of wait and see. It makes sense to me - if the conditions aren't right and this economy is going to be damaged and particularly if the exchange rate is so high that we couldn't possibly go in without being permanently then "shut-up" about the euro and let us just watch and see how the situation develops and then argue later on when the conditions are right. I shall still oppose going in but euro enthusiasts for whom the European Union is more important than the national interest will still want to go in - but that is an argument that comes later and it is not relevant now.

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