BBC On The Record - Broadcast: 26.05.02

Film: Terry Dignan asks whether the Treasury's five economic tests to join the euro can really be met on economic criteria alone.

ACTUALITY. TERRY DIGNAN: The Eurovision.....Con-Tests - as some describe them. MUSIC. DIGNAN: Move over Terry Wogan. It's time to get serious. A momentous decision may soon be upon us. And it will matter a tad more than who won last night's extravaganza in Estonia. When Eurovision last came to Britain four years ago, Labour had ruled out a referendum on the single currency until five economic tests had been met. By the time of next year's contest we're promised we'll know if we're ready to join. While it's hard to read the Chancellor's mind, Tony Blair appears impatient for an early referendum. JOHN MCFALL MP; There is a window of opportunity for this referendum to take place, within this Parliament and next year it's recognised that, that is that time when it should take place. JANE GRIFFITHS: There is a very strong ground swell of opinion among Labour MPs that the tests have been met and that it's time to get moving. DIGNAN; The Eurovision Song Contest. There are few events which attract more sneers from the critics. Just listen to some of the lyrics they say. They can mean anything you want them to mean. A bit like Gordon Brown's five economic tests, it's argued. But just because there'll be doubts over what the tests really mean that may be no bad thing from Mr Brown's point of view. Because, according to the cynics, it will ensure the assessment of the tests will produce exactly the result the Government wants. When the call comes there's no escaping the big moment. But, say the critics, that's what Labour did five years ago over holding a Euro referendum. It used the economic tests as an excuse, it's claimed, for delaying an appointment with the voters. The public will be asked to vote on joining the Euro only when the tests are met. There must be sustainable convergence between the United Kingdom and the economies of those European countries which now use the single currency. Sufficient flexibility within the UK economy to cope with economic change is also required. The effect of joining on investment is test number three. Number four - the impact on our Financial Services Industry and number five, whether joining the Euro is good for employment. Yet the validity of the tests is doubted even by those leading economists who believe they've already been met. MARTIN WHEALE: Some of the tests, or one in particular is very odd. The government says that it's concerned about the Financial Services Industry, the implication being that Britain would stay out if it was bad for the Financial Services Industry, even if it was extremely good for everyone else. And I don't understand the priority it gives to the Financial Services Industry, I don't understand why one group should have a veto over the national interest. ACTUALITY - Singing So near - so near. So far - so far. DIGNAN: So near - so near. So far - so far, sang the UK contenders in 1998. Which nicely describes the difference between economists who believe we're almost ready for the Euro and those who say we're not. The Treasury's assessment of the tests - to be completed by June next year - won't end the arguments, according to the former civil servant responsible for refining the tests' wording. SIR ALAN BUDD: They're about directions, they're about how close you are to other economies, so there is a wide area of judgement, in which I think perfectly reasonable people could say yes, I'm convinced by the evidence, it's okay to join, and others, seeing the same answers, will say, well I'm not sure, I don't want to join just yet, and I think within the, any reasonable future, the outcome is going to lie in that range of uncertainty. DIGNAN; Gordon Brown is far too serious a politician to subject his economic tests to this sort of treatment. But why not? Finding a Eurovision winner is hardly a scientific exercise and nor, some argue, is resolving the single currency dilemma. Many regard it as a political question even though the Chancellor maintains the assessment of his tests overrides all other considerations. GRIFFITHS: Well I would hesitate to compare Gordon Brown with Mandy Rice Davies, but they would say that wouldn't they. That's what treasuries do and that's what Chancellor's do, is to say, no, we've got to look carefully and prudently at the economy and of course that's right that the Treasury should do that. But the Treasury is not the whole story, the political reality is the other half of the story. BUDD: We can't have an important decision, like whether we join the single currency, being taken by civil servants, that would be wholly inappropriate. It has to be taken first of all by politicians, and then by the people, and since the five tests are so important in this process, there must be this ministerial, this political judgement involved. So the Treasury officials will do an excellent piece of work, quite wonderful, setting out all the relevant information, asking all the right questions, providing all the tables, providing all the graphs, they'll give all the information. But the final conclusion of whether these tests are passed, will be made by the Chancellor of the Exchequer, together with the Prime Minister. DIGNAN; Like the contenders in last night's Eurovision contest, supporters of Britain joining the Euro face an anxious wait. But maybe they shouldn't hold their breath. Because if Mr Blair thinks he can win a referendum, then, it's claimed, the result of the assessment will be a foregone conclusion. But if he thinks he is going to lose, then, surprise, surprise, we'll be told we're not yet ready for the Euro. BUDD: I may be being too cynical about this, but I assume that the Prime Minister and Mr Brown do not want to embark on a referendum, unless they think they can win it. If the five tests are passed, we know they have to hold the referendum, therefore you can see that the logic may work backwards from the referendum to the five tests. If they think they can pass the referendum and want to do so, then they are more likely to find that the five tests have been passed. If they'd rather postpone the referendum, then I think they're more likely to find that we're nearly there but not quite, and we ought to wait a little longer. DIGNAN: Not everyone will agree that last night in Estonia the judges got it right. Mr Brown though will want to convince his audience, the electorate, that the assessment of his economic tests is spot on. So he's promising that all five will have to be met clearly and unambiguously before Britain joins the Euro. But can anyone be so certain about a decision which many regard is as much political as economic. LORD HASKINS; Yes, I mean the word unambiguous is a problematical word. What economist was ever unambiguous, there's always going to be one economist to challenge the view of another economist. So in that sense I think looking for a one hundred per cent answer is going to be very difficult. MCFALL; Well I can sympathise and understand the Chancellor in trying to get his view across that he is very, very firm that these tests must be met but I also concur with economist you know, put two economists in a room and you get two opinions or maybe three opinions. The Economist magazine itself last year did a survey of academic economists regarding Euro entry and would it be good or bad for the country and I think it was split fifty-fifty down the middle. So the phrase clear and unambiguous I think does not apply to economics. ACTUALITY: Singing "We've both made the same mistakes". DIGNAN; In Estonia last night Jessica Garlick sang for her country. Some supporters of Euro entry believe it would be a mistake for Tony Blair to allow Gordon Brown to dissuade him from holding a referendum on the single currency. They fear the Chancellor has been allowed to set too tough an obstacle to joining Euroland. ACTUALITY; "Thank you." DIGNAN; But others say it's a ploy to enthuse wavering voters. FRANK FIELD; The person who'd increasingly been presented as Mr bad in the fight with the Prime Minister, the sceptic, would announce this Pauline conversion and say actually, though I've always held these views, I think now the tests have been passed. LORD HASKINS: I think that if Gordon Brown does get up one day and says we've passed the tests, that sure as hell is going to impress a lot of people who think that Gordon Brown is rather a good Chancellor, which I think would be extremely helpful, to the argument. DIGNAN; It's twenty one years since Bucks Fizz won for Britain with making your mind up. Supporters of the single currency hope they won't have to wait that long before the Government decides to hold a referendum on the Euro. It's all a question of meeting its economic tests. Or so we're told. Because many suspect the test which really matters is the missing one - can the Government win the referendum?
NB. This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.