Ten years on and we can see the same situation emerging. At the time of writing the pound is currently 6% higher (at DM 3.15) than the DM 2.95 central rate whilst in the European Monetary System between 1990/2; and 13% above the rate at which the markets thought we were overvalued before being ejected from the EMS.
Jobs in manufacturing are down 242,000 in 14 months, now at their lowest number since 1994. Manufacturing investment was cut by 14% in real terms last year and manufacturing output was down every month since last November. On top of this, according to the ONS in their latest 3-month figures, the UK trade deficit with our European neighbours has more than doubled and stands at £1.5 bn.
Our biggest export markets are with our European partners and it is precisely to avoid these exchange rate fluctuation problems that we would join the Euro. Not joining up to the Euro has meant that our exporters are still at the whim of speculators. If we had joined a couple of years ago (and we would have done so then at a competitive rate), our exporters wouldn’t be faced with these monetary fluctuations.
This is why we need to bring down the value of the pound, making our businesses more competitive, whether we join the Euro or not – but if we do not do so, joning the Euro avoids any repeat of the problem.
Therefore, the Lib Dems have asked a panel of economists to look seriously at the conditions needed to join, especially at the right exchange rate for sterling and how to achieve it. The thirteen-strong group includes former MPC member, Willem Buiter, exchange rate specialist, John Williamson, and National Institute Director, Martin Weale.
This is the first positive step from any political party to help British businesses and safeguard jobs from being priced out of the market. When the group reports back, the results will give the country some real goal posts by which to have a constructive and positive debate. The final choice on the Euro will be with the British public in a referendum – but at least the potential benefits will be a lot clearer, with no thanks to our mainstream press!
Matthew Taylor is Treasury spokesman for the Liberal Democrats