IT'S GORDON McGAULLE

Robert Peston says the Chancellor wants

to save Europe by his example (and Sarah's)

THE Treasury man on the end of the phone said, 'Ever since Sarah, Gordon has become obsessed with European reform.' Or at least that is what it sounded like. As this senior official started to explain the minutiae of federalism versus intergovern- mentalism, I understandably mused about why marriage should have turned the Chancellor into an apparent Eurosceptic.

Eventually the penny dropped. My informant was talking about Brown's con- version at Teira' — the location of a recent European summit in Portugal rather than in the embrace of Sarah (although doubtless she has had an equally profound effect on him). Whatever the cause, Brown is a born- again European reformer and is planning to spend the next six months at least cam- paigning in his new guise as McGaulle. His obsession is the talk of the Treasury. `He is completely fixated on Europe,' said a minister. TranIdy it is getting a bit tedious.' That is, of course, slightly over- stating it.

The Chancellor also faces the small dilemma of how to avoid a humiliating climbdown on fuel duty without risking further unpopularity for the government. But Brown's most powerful trait is that, once he is set on a course he will not be budged. So, when politics returns to any semblance of normality, he will emerge from the shadows as the champion of the nation state.

But what does this mean precisely? Can it be true that a politician whose love for Europe was matched only by Ken Clarke's has become a little Scotlander? And does he really believe he can turn back the tide of European integration and rebuild Europe as a partnership of contentedly co- existing nation states?

In fact Brown would deny vehemently that he has lost the European faith. Quite the contrary, he would say. As the John Knox of New Labour, he is convinced that he alone knows the way to salvation in Europe.

And he is fired up to rally other Euro- pean governments to the cause. 'We are sure that Fabius and Eichel [the French and German finance ministers] will come round to our way of thinking,' said one of his colleagues. 'The fact is that unless they adopt our approach, the euro is doomed. If they want their currency to rise, they have to attract investment. And to do that, they have to follow our agenda of deregu- lation and low taxes.'

There are one or two problems associat- ed with this approach, not least of which is that it is startlingly reminiscent of the hopeless campaign waged between 1994 and 1997 by John Major. For Major it brought ridicule at home and abroad, so why should it be any different for the brooder from Dunfermline?

Well, Brown starts from a stronger posi- tion. What he achieved at the Feira sum- mit — underplayed by a UK media which on the whole prefers to revel in UK isola- tion and defeat — was not trivial. After three years of campaigning almost alone — aided only periodically by the tax-dodg- ing dentists' favourite holiday getaway, Luxembourg — he persuaded other EU governments to drop their demand for a Europe-wide withholding tax on savings.

The German government and the Euro- pean commission had, through many European summits, been pushing for this new tax. However, Brown would not be budged. And his tactics were, by British standards, sophisticated. He promised his finance-minister colleagues that his offi- cials would produce technical documents on the subject and then endlessly delayed their completion. When eventually fin- ished, the papers were consistently tedious and incomprehensible. 'I have to say that they handled it brilliantly,' said an adviser to the previous Tory govern- ment with a close knowledge of the saga.

For possibly the first time, the long-run- ning trend towards harmonisation of Euro- pean taxes had been broken. But sadly it all went to the heads of the Treasury team. `Brown believes that he can change the entire terms of the European debate and has got teams of officials working on new EU initiatives,' said a minister.

The follow-through from the Feira coup looks much more like a typically British quixotic mixture of the undeliverable and the misguided. In the former category will be Brown's crusade to extend the with- holding tax victory into a broad recogni- tion among the UK's European partners that their aspirations to harmonise taxes should be abandoned in favour of common action against supposedly unfair tax breaks. 'We want acceptance that tax com- petition (or countries undercutting each other's tax rates) is a good thing,' said a friend of the Chancellor.

Such an approach is laudable and would find almost universal favour in the UK, but even those closest to the Chancellor have not yet pencilled in a date for a European treaty amendment prohibiting tax harmon- isation. 'Look, we think our approach would be good for the euro, because it would boost the confidence of internation- al investors,' said a minister. 'But I guess it is fair to say that other finance ministers still need some persuading.'

In the category of more realistic initia- tives is a comparable approach to financial regulation, with the UK championing mutual recognition of national codes as opposed to French ambitions for Europe- wide regulation. But the Treasury appears to be devoting most effort at the moment to an uncharacteristically fatuous example of institutional reform. It is working on proposals for the creation of an indepen- dent competition authority for Europe, modelled along the lines of the recent replacement in the UK of the Monopolies and Mergers Commission by a Competi- tion Commission.

The principle of taking the politics out of competition scrutiny is a good one. The snag is that the European Commission's approach to the adjudication of mergers and acquisition and cartel-busting is a rare instance of EU sanity. On the whole it has ignored pleas from capitals to wave through mergers designed to create so- called national champions, and has shown surprisingly little deference to some big and powerful businesses. Frankly, it is dif- ficult to believe that this approach could be improved much, so Brown would be advised to direct his fire elsewhere.

There is of course one final crucial ques- tion, which is, what does this reforming agenda mean for the government's hopes of taking the UK into the euro after the general election? One minister said that in removing important economic obstacles it could pave the way for British entry. But this is either disingenuous or self-deluding. Such a campaign is likely to reinforce the perception of the UK electorate that the Euro economy runs on rules which are unBritish, and would therefore raise the political hurdles to British participation in the euro. But it is just possible that the reconstructed Gordon Brown, the post- Sarah Chancellor, is perfectly relaxed about that.