Crystal calls in from the year 2003 with a line on the famous five tests
It was kind of Ed Balls at the Treasury to introduce me to his smarter sister Crystal, who is now my futurological correspondent. She reports from the year 2003, when the government (or so the Prime Minister says) will have made up its mind about joining the euro. Will Britain have passed the famous five tests? Crystal Balls takes us through them: Are we close enough to Europe to live comfortably in the euro? It would be surprising if every country in Europe could fit comfortably into one currency with one interest rate and one exchange rate. They can't, and Ireland was only the first. We would always have been a more awkward fit than most, if only because we trade with the world and not just with our neighbours. That was never likely to change fundamentally over a couple of years. Is there enough flexibility to deal with any problems? Less than there used to be. Give the Commission its head and it will make our labour markets as inflexible as Europe's. Would joining the euro encourage investment in Britain? Well, something else seems to have encouraged it, because it keeps on coming. Inflexible labour markets might discourage it, of course. What about the City? It has shown that it could manage perfectly well inside the euro or out. It's an international marketplace. It handles more dollars than anything else, but sees no need to force the pound to join the dollar, let alone to unite with the United States. Growth, stability, jobs? Maybe more stability than growth. Not that the euro got off to a particularly stable start. As for jobs, the unemployment rate in Europe is still twice as high as ours, so we need still be in no hurry to converge with it.
It's optional
OUT here in 2003 (Crystal adds) we can see that there are more tests than the famous five. There's an obvious sixth test, which is the rate of exchange. Are we happy with it as it is? What would we like it to be? Dare we risk getting locked in at the wrong rate, which is the mistake (or one of them) we made when we joined the exchange rate mechanism? An exchange rate is only a price in a market, so there can be no such thing as a right rate, or not for long, let alone for ever. Then there's the survival test: how could we manage outside? You could say that for most of the pound's long history we managed rather well, that the world still sustains 170 different kinds of money, and that its fourth largest economy can surely stretch to a currency of its own. Final test: shan't we have to join in the end? Not unless we choose to. Will that do? OK — now put me through to Ed.
Paying the bills
SIR John Browne deserves to be the Chancellor's best friend. He is chairman of BP Amoco, Britain's most profitable company and almost certainly the biggest contributor to the Exchequer. Last year BP Amoco chalked up almost .E10 billion of earnings after paying £4 billion of corporation taxes in its various jurisdictions and another £700 million on its operations in the North Sea. On top of that come the taxes the Chancellor levies on the products it sells at the pumps. His rates are the highest in Europe, and bring him in a little matter of .E6 billion a year. Then he has the nerve to keep quiet while the innumerates at the Automobile Association call BP Amoco's figures further proof that the oil companies are overcharging drivers. He should be naming hospitals after them, feting their chairmen or at the very least sending them grateful little acknowledgments. They pay the bills.
Keep it simple
THE state pension is well on the way to its destination as an old-age luncheon voucher, and the Centre for Policy Studies proposes that we should be able to opt out of it. Instead we would contribute to a funded scheme, the state would top it up, and everybody (taxpayers included) would be better off. I wish I could greet this prospect with the enthusiasm that its ingenuity deserves, but I am not sure that we need another entrant to the long list of officially approved and vetted pension types — basic, Serps, stakeholder, ISA-related, occupational, personal, final-salary, money-purchase. . .. Their taxonomy may bring a sparkle to the actuaries' eyes but most other eyes will glaze over. I urge the CPS to keep things simple and (as I was arguing last week) to think in terms of a code that treats all forms of long-term savings alike. As for the state pension, it should be left to stand as a warning to us all not to put our trust in governments.
I'm on a train
MY railway correspondent, I.K. Gricer, is evading the call to become chairman of Railtrack, but from a buffet car near Crewe he breaks cover to draw my attention to Crossrail. This plan to run mainline trains east and west across London in tunnels is back on the wish-list, blessed by Sir Alastair Morton at the Strategic Rail Authority. The Corporation of London loves and longs for it, my correspondent says, but the Treasury hates it. Last time round, the Treasury decided to economise on stations and got the interchange at Farringdon cut out. This wrecked the traffic projections, so Crossrail was spiked. Better luck this time, says I.K. Gricer.
A bid for preference
THE Dome's clearance sale is under way, and I am going to gear up on my bid for the Money Zone. I shall take the money Out and bid for the Dome itself. I plan to develop it as a high-technology park, leisure centre, Olympic stadium and bus garage, with a transporter bridge across the river to Canary Wharf. I have already commissioned an artist's impression, thrown a party, and engaged a firm of publicists. Thanks to their good work, the world has been told that my scheme is backed by Albert Square Estates, the company owned by the Duke of Eastender. This, and my own track-record in residential property financed by NatWest Mortgages, should refute any suggestion that the project is beyond my means or that my bid is in some way flaky. Only this week it secured new support from a fellow director of mine on the board of Accrington Stanley. I am sure that ministers will soon come to prefer it and not ask too many questions. Sellers can't be choosers.
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