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Blair cannot now be honest about the euro


We all know that politicians habitually tell porkies, but rarely do they announce in advance their intention to lie to the voters. Tony Blair told the British public in 1997 that he would recommend membership of the euro on one and only one condition: “If the economic case for doing so is clear and unambiguous.” He restated this many times in Parliament and confirmed it in last year’s election manifesto.

But last week, Gus O’Donnell, the head of the government economic service and director of the Treasury team whose job is to make this assessment admitted that the case for Britain joining the euro cannot be honestly presented in this way. “Economics can never be clear and unambiguous. Ultimately it will be a political decision.”

This comment by Mr O’Donnell may have seemed commonplace to regular readers of this column, or indeed to anyone with a reasonable understanding of politics or economics. But although it was merely a statement of the obvious, it could have a transforming effect on Tony Blair’s place in history, like the cry of the little boy in the tale of The Emperor’s New Clothes.

I have always believed that the hurdle to euro membership introduced by the 1997 statement was an extremely high one and that those three words — “clear and unambiguous” — would be the pivot on which the Government’s entire European policy might eventually turn. Mr Blair may not have realised this at the time. Maybe he hardly even thought about the precise wording when he allowed the Treasury to devise this extremely rigorous standard of proof. Or if he did originally understand the litany that he has been repeating since 1997, he may simply have forgotten its meaning. Be that as it may, it has put him in an extremely embarrassing — and potentially dangerous — position.

Mr Blair apparently decided just before Christmas that taking Britain into the euro would be the crowning glory of his political career. Having defeated international terrorism and reconciled Islam with Christendom, he was naturally keen to resolve the Irish question, to revitalise Britain’s public services, to civilise Africa and to eliminate world poverty. But persuading a sceptical British populace to join the euro would be Job One for the rest of the current Parliament — or so we were told by numerous “close friends of the Prime Minister” and “Downing Street sources” who claim to know Mr Blair’s mind better than he does himself.

If Mr Blair did genuinely plan to shift public opinion and to hold a referendum on the euro in the next 18 months, he is more of a riverboat gambler than I imagined. But maybe he is. And until the Treasury exploded the policy of presenting a euro vote as a matter of self-interested economic calculation, the Prime Minister could at least calculate the odds. Given the remarkably consistent two-to-one opposition to the euro in most opinion polls, the probability of Mr Blair winning a referendum seemed similar to the chances of Iain Duncan Smith becoming Prime Minister in 2005. Long odds, but possibly worth a flutter, given that the costs of defeat might not have been too catastrophic.

If Mr Blair lost a referendum after fighting a truly principled campaign focused largely on economics, he could continue as Prime Minister and throw himself with even greater energy at other tasks without the distraction of the euro issue.

But what if the referendum turned into a vote on Mr Blair’s honesty, not just on his economic judgment? What if the question discerned by voters between the lines was not “do you support the Government’s recommendation to join the euro”, but “do you think the Prime Minister is telling you a pack of lies”? It would be far more difficult, probably impossible, for Mr Blair to recover from such a defeat. Labour might still win the next general election, although Tory morale and the personal credibility of its leadership would be hugely boosted. But Mr Blair would at best become a lame-duck Prime Minister and he might well be forced out by rivals even before 2005.

Yet that is the basis on which any referendum campaign is now certain to be fought. Whether Mr Blair tries to stick to economics or admits that the main reasons for joining the euro are really political and diplomatic, his personal honesty will now be irrevocably impugned if a referendum is called.

Suppose Mr Blair persists in trying to present the euro vote as a purely economic decision. To do this, he would have to force the Treasury to produce a bland and ambivalent assessment. The Chancellor or the Cabinet could then append a few paragraphs, purporting to identify “clear and unambiguous” economic benefits of joining the euro in the Treasury study.

It is now accepted, even by the most enthusiastic euro-lobbyists, that such political twisting is the only possible way of arriving at an apparently clear-cut economic decision in favour of membership. This is not the time to go into the detailed economic debate, since it suffices for the moment that not even the most pro-euro economists claim to have an unambiguous case.

To see why Mr O’Donnell is right and a “clear and unambiguous” criterion can never honestly be satisfied by an economic assessment of the euro, you can do no better than to read the pamphlet produced last November by the No campaign — The economic case against the euro. This was endorsed by a galaxy of former Treasury and Bank of England economists.

But even respectable pro-euro economists are honest enough to concede that they cannot offer absolute certainty in their arguments for joining. For example, Britain in Europe, the principal pro-euro lobbying organisation, concludes in its main economic pamphlet The Case for the euro: “Though there are economic arguments on both sides, the arguments in favour of joining have the greater weight. There will never be a time when there is not some disadvantage to joining.”

Responding to the row over Mr O’Donnell’s comment, the fervently pro-euro Financial Times made the frustration with a truly rigorous economic assessment more obvious in its leading article on Monday:

“It is almost inconceivable that economics alone will provide a clear and unambiguous case in favour. Politicians must decide on the balance of the evidence. If they judge this is in favour, they must say that the case is clear and unambiguous enough.”

The delightfully oxymoronic concept of “clear and unambiguous enough” may be acceptable in a newspaper column. Such blatant cynicism may even appeal to some of the Labour Party’s self-styled “bruisers” and “fixers”. In the past few days several leading Labour figures, including Charles Clarke, the party Chairman, and Peter Hain, the Europe Minister, not to mention Peter Mandelson, seemed to endorse an approach very similar to the one recommended by the FT. But a Prime Minister who staked his personal reputation — not to mention the future of the nation — on such a transparent falsehood would soon be exposed and laughed to scorn.

But if Mr Blair decides to hold a referendum before the next general election, his only alternative to lying during the campaign to the public, would be to admit that he had misled them in 1997 and done so again in 2001.

To run an honest campaign, Mr Blair would have to admit that joining the euro would be first and foremost a political decision — to promote and influence European integration, to increase Britain’s influence on the world stage, or to elevate Mr Blair’s own place in history — which might bring some economic benefits, but would also inevitably entail huge economic risks.

In itself such an argument would be perfectly honourable. But unfortunately for Mr Blair, this trade-off between the political benefits and economic risks of euro membership is a terrifying choice which he explicitly promised not to inflict on the voters, at least in the present Parliament. That was surely what he meant by his firm referendum commitment only to recommend euro membership if the economic advantages of joining were clear and unambiguous.

Mr Blair simply cannot recommend the euro as long as he is bound by his promises in the 2001 election campaign. That much is unambiguous and clear.



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