On 23 February, Tony Blair launched the government’s national changeover plan in the House of Commons. Its purpose is to provide a framework within which departments in the public sector, and firms in the private sector, can prepare for the introduction of the euro to the UK following a referendum in, say, 2001.
The changeover plan effectively envisages that accountants in industry will be agreeing budgets to spend the relevant money, while accountants in practice will be advising clients on the issue.
I believe the plan failed to address two crucial questions, the answers to which companies need to help them allocate potentially billions of pounds to prepare for Britain’s entry into the single currency.
Firstly, it gave no indication as to how the government is proposing to win a ‘yes’ vote in the referendum. The Treasury is pushing the line that the UK will not suffer economically from being outside EMU. Taken at face value, this demolishes one of the main planks in a yes-vote campaign; viz, that we need to join EMU because we are suffering economically from being outside.
The Treasury’s position is made even more untenable as a result of a recent parliamentary statement by trade and industry secretary Stephen Byers that the UK motor industry will suffer from being outside EMU. If the government wants business to invest large amounts preparing for the UK’s entry into EMU, it really must get its act together.
Secondly, the plan made no reference to the question of the ‘entry fee’ which the EMU countries may levy on the UK in return for allowing us to join. The Treasury refuses to acknowledge this as an issue, but at least one German politician has already publicly signalled there will be an entry fee to pay. This could be in terms of a ‘keenly negotiated’ exchange rate for the UK, or perhaps a combination of an increase in the UK’s contributions to the EU and acquiescence by the UK to further tax and business regulation harmonisation.
I believe accountants in both industry and practice have an interest in trying to form an ‘audit type’ view on whether or not we will be joining EMU. This is surely irrespective of one’s personal views; for my part, I subscribe to Chantrey’s house view that if it is in the UK’s interest to join EMU, then we should do so. It follows logically that I believe accountants should consider pressing the Treasury for answers to our questions.
Maurice Fitzpatrick is head of economics at city accountants Chantrey Vellacott DFK.
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