Friday 7 February 1997

LABOUR SHIFTS A BIT ON EUROPE

New Times, 5 February 1997

Shadow foreign secretary Robin Cook's remarks on the Dimbleby programme about a single European currency – that he would back Britain joining if it was working in 2002 – have been widely reported as a surprise shift in Labour's position on economic and monetary union. But they had been some time in the pipeline.

Although, so far, it has barely figured in the sparring of the run-up to the election campaign, the biggest headache facing Tony Blair is undoubtedly Europe – specifically, whether a Labour government will sign later this year sign up for the first wave of EMU.

Until some time last year – it is impossible to put a precise date on it – EMU seemed to most Labour politicians to be a rather distant problem. Of course, the 1991 Maastricht treaty laid down a strict timetable for creation of a single currency, with EMU itself beginning by 1 January 1999. That meant the member states of the EU making up their minds in late 1997 whether or not they wanted to join, with the final decision about who would be admitted being made by early 1998.

But after the turmoil in the currency markets of 1992-93, it seemed implausible that this timetable would actually be put into practice. Italy, Spain and several smaller countries looked unlikely to qualify for participation under the strict convergence criteria laid down by Maastricht, and it was by no means clear that France, Britain or even Germany would make it either.

With the Tories tearing themselves apart over Europe, it did not seem particularly urgent for Labour to come up with a hard-and-fast policy. The formula that the party had adopted in 1991, that it was in favour of EMU in principle but would join only if the conditions were right for Britain, appeared perfectly adequate to take Labour through to the election – particularly as it had been honed by shadow foreign secretary Robin Cook since late 1994.

Cook's line, that Labour wanted the proposed European central bank to be "accountable politically to make sure it pursues policies of growth and full employment" and that it insisted on "convergence of the real economy - of output, production and growth" before it would recommend British membership of EMU, satisfied all but a handful of the party's MPs and MEPs. Those of a sceptical disposition could take comfort in the qualifications; enthusiasts could point to the backing in principle for a single currency.

This has remained Labour's formal position, with the addition, last November, of a promise that a Labour government would put British membership of the single currency to a referendum if it decided that it was in Britain's interests to join.

All that Cook's remarks show is that he has prevailed in a behind-the-scenes argument at the very top of the party about how the position should be nuanced to take account of the facts that EMU is now very likely to go ahead on schedule and that most of continental Europe is prepared to go through almost any amount of hardship to be part of it. From early last year, Labour's 'big four' – Tony Blair, Gordon Brown, John Prescott and Cook – were forced into some serious thinking about whether Labour would go for EMU membership in its first few months in power.

Their problem was that each had a different perception of the issue at stake and a different instinct about how to deal with it. Brown was the initially most enthusiastic about EMU membership in the first wave. He was one of the architects of Labour's pre-1992 policy of backing British membership of the ERM (along with his mentor John Smith) and, for all his fiscal conservatism when it comes to running Britain's own economy, in his first years as shadow chancellor he gave strong backing to Jacques Delors' plans as President of the European Commission for a role for Keynesian counter-cyclical policy for job creation at a European level.

At the other extreme, Prescott was against the single currency on principle – a point of view he had not changed since the prospect of EMU first raised its head – although he was said by colleagues not to be particularly well informed.

In between Brown and Prescott were Cook and Blair. Cook, like Brown, was fully up to speed on the detail and was an enthusiast for European counter-cyclical economic policies. But he harboured doubts about whether EMU would work and was sceptical about Britain's ability to join in the first wave because of the amount of legislation it would require in the first year of a Labour government. He argued that Britain should not go into the single currency at once but should join later if conditions are right.

Blair took a position somewhere between Brown's and Cook's – but like Prescott was said not to be completely au fait with the technicalities. Although he is no anti-European, the Labour leader has never taken a great interest in European politics and feels ill at ease with the EMU argument. Perhaps understandably, he is more worried by winning the election than by what he does afterwards.

Attempts to reach a consensus at the end of last year resulted merely in the agreement that Labour would back a referendum but would not rule out being part of the first wave of EMU. Cook's public statement that Labour would probably not enter in the first wave but that it would be very difficult to stay out if EMU was working well in 2002 indicates that the stalemate was broken by Brown conceding the unlikelihood of first-wave membership in return for Cook becoming more enthusiastic about the benefits of EMU. It doesn't actually solve the problem of making the decision when the time comes – but it should preserve Labour's unity on Europe until the election. And that in itself is no mean feat.