The Common European Currency
(Article by S F Bush in Pensioners’ Choice, Sept/Oct 1998)
As most people are aware, eleven states of the European Union, led by Germany and France, have decided to abolish their currencies – D Marks, Francs, Lire, Pesetas, etc. – and use a common currency, the Euro, instead. This change is intended and designed to be irrevocable. No country has ever taken such a step and survived as an independent state. From time to time some countries have linked the value of their currencies to those of other countries (for instance, the Irish pound was so linked to the pound Sterling from 1922 to 1972); but these have been temporary arrangements made by sovereign governments of the day.
The nearest historical equivalent to the establishment of the Euro as the only legal tender in the eleven participating European states is the establishment of the US Dollar in the thirteen former English colonies following the founding of the new United States of America.
Nobody that I have ever met outside Britain has ever had any doubt that the adoption of the Euro, if successful, will lead inevitably to the participating countries being joined together in a new country, the United States of Europe. And indeed, while the economic arguments rage, many people believe that the whole purpose of the Euro is, in fact, political – to bring about the United States of Europe.
Britain, as we know, is not participating in the Euro at its start date of 1st January next year; but it is the stated position of the present government to prepare Britain for participation sometime in the early years of the next century. The present government recognises, however, that around two-thirds of the population are opposed to abolishing the Pound.
In the 1997 general election all parties, where they were not opposed in principle to giving up the Pound, promised to give the people the final say in the form of a national referendum. There is no certainty yet, however, that these parties will hold to that promise at the next election.
Why is the currency so important? It is not just a means of exchange as some would pretend – a VISA card can do that! National currency is actually of symbolic, constitutional and economic importance. Establishing a currency with its own symbols and national bank is what each newly independent country, including the USA and all 53 members of the Commonwealth, from Australia to Zimbabwe, has always done.
Having its own currency enables an independent state to raise taxes and set interest rates in order to carry out its duties exclusively in the interests of its own citizens. The provision of pensions is one of the most important of all the functions of an independent state.
Britain, like the other English speaking countries, has a highly developed system of contributory occupational pension schemes running alongside the flat-rate state pension paid from taxation. Now while not everything in our national pensions garden is rosy, of course, one thing is very much better than in every other modern country. The International Monetary Fund has discovered unfunded public sector pension liabilities in Germany of 116% of one year’s national income, in France 118%, in Italy 79%, with Britain much the lowest at 8%. Now one can see where all those marvellous Continental pensions have come from – by piling up debts for future generations.
With pensioners making up an increasing proportion of the populations of all industrial countries, the problem of funding pensions in the Euro countries can only get worse without huge rises in their taxes. As it is, their overall tax rates are significantly higher than ours, which is why many of their young people are coming here to work.
Seeing this, the Economic and Social Committee of the European Parliament last year called for tax “harmonisation” – that is equalisation – to prevent what they refer to as “harmful tax dumping” – that is to say, low taxes. In short theirs could be lowered and our taxes would be raised to pay for, among other things, their much higher levels of pension debt.
The Euro pensions debt issue is clearly one of the most important economic factors that will, we trust, be taken into account in the Government’s promised assessment of the advantages and disadvantages of keeping the Pound.
But we must surely have regard also to the long view. The Pound is by far the longest established currency of any nation in history. While many of us were fed up with its rapid depreciation against other major currencies in the 70’s, that period is well behind us. Whereas the Pound has been our currency for hundreds of years, the currencies of Germany and France have been abolished and replaced several times in the last hundred years alone. For us, by contrast, the Pound is surely both an everyday symbol of our enduring nationhood, and in its very name “Sterling” an expression of one of our most prized national characteristics.
A Brexit Blueprint: Britain Revitalised and Independence Regained
This is one of the final six prize-winning essays in the Brexit (Britain’s Exit from the EU) competition held by the Institute of Economic Affairs and judged in April 2014. The scenario was that the Referendum for leaving the EU had been held and the decision to leave taken. The essay describes what the government’s subsequent actions should be and the benefits that would accrue to the people of this country as a result.
To read a pdf of the full essay and appendices, please click on the link BushBrexit4
Single Market Realities I
During this EU Referendum Campaign, there is so much talk about what would happen in the way of tariffs imposed on our exports to the EU if we leave. To find the true picture about EU tariffs, please read or download the two-page pdf Single Market realities I.
Single Market Realities II
Another contentious issue is the “Single Market”. What has it done for us over the last 40 years? Will we be able to sell into it after leaving the EU? To find the true picture about the Single Market, please read or download the two-page pdf Single Market Realities II.