Friday 11 February 2000

BRITAIN IS SET TO MISS THE EURO BOAT

Paul Anderson, Tribune column, 11 February 2000

Back in 1996, Labour's announcement that it would hold a referendum on British membership of the single European currency was hailed by just about every mainstream commentator as a brilliant political gambit.

Not only did it match the Tories for populism on Europe, it also defused a row that threatened to split Labour right up to the very top. At the time, while Gordon Brown and Peter Mandelson favoured early British membership of the single currency, Robin Cook was cautious, John Prescott was strongly against and Tony Blair could not make up his mind. The promise of a referendum when the time was right put off the argument until, well, the time was right.

As an out-and-out European federalist supporter of British membership of the single currency, I was unconvinced: it seemed like a fudge of the worst kind over the most important question that would face the next Labour Government, as well as a hostage to fortune.

But I didn't expect the story to play out as it has. Three years ago, I reckoned that, if we got a Labour Government with a reasonable majority, Blair would come off the fence on the euro, Cook would drop his reservations and – with Prescott grumbling in the background – the referendum would place within a year or so of the general election.

This scenario looked even more plausible after Labour won so massively in May 1997. But then the Government lost the plot completely.

Blair did not come off the fence, and Brown appeared suddenly to change his mind. In autumn 1997, the Chancellor's press spokesman, Charlie Whelan, famously informed journalists – and drinkers in the Red Lion pub in Whitehall – that British participation in the euro would not happen during this parliament.

Brown then tried to retrieve the situation by declaring that this did not mean that he was against joining in principle, and that Britain would become a member of the euro-club once "five economic tests" were passed. In the meantime, he went on, the government would prepare actively for membership.

The damage had been done, however. After the Red Lion Incident, the political initiative passed to opponents of the single currency. Through 1998, opinion polls showed growing public hostility to joining the euro – and the government responded by effectively withdrawing from the debate. It was not until March last year that Blair gave his first tentative public indication that he would be throwing his weight behind a "yes" campaign (whenever it might happen), and he appeared to recoil even from this after Labour's drubbing in the European elections.

Last summer, he agreed to support the launch of Britain in Europe, originally intended as the cross-party campaign for membership of the single currency, only if it changed its purpose to promoting the overall benefits of British membership of the European Union. And last month he went out of his way to scotch rumours that the promised euro referendum will take place immediately after the next general election. Meanwhile, Brown has noticeably cooled on euro membership – effectively leaving Cook, who has changed his mind in the opposite direction and now favours early entry, as the only senior member of the cabinet publicly making the case for participation even in principle.

With the opinion polls now showing nearly 70 per cent of voters opposed to joining the euro, the Government's half-hearted attitude is unlikely to change before the next general election: if New Labour stands for anything, it is for down-playing any policy that target voters dislike. But this in turn makes it extremely unlikely that public opinion will swing behind the euro, which in turn puts in jeopardy the prospects of a referendum even in the next parliament. The last thing any government can afford is a referendum it loses.

Of course, it could be that Labour launches a concerted drive to sell the benefits of belonging to the euro-zone – lower interest rates, faster growth – as soon as it wins a second term. It could be that public support for the euro surges and that the government decides to hold the referendum a couple of years after the election. But somehow I doubt it. If New Labour didn't dare make the push for participation in the single currency with a Commons majority of 278, is it going to be more courageous with a majority of, say, 50? I hope I'm wrong but, more and more, 1996's "brilliant political gambit" looks like being the cause of Britain yet again missing the European boat.