The pound's not sound

Richard Butt
18/ 4/2008

IT HAS been years since there has been a serious debate on whether we should join our neighbours in using the Euro.

These have been years in which the pound has been doing rather well, thank you, and we’ve been able to splash our cash on holiday quite liberally.

The fact that the pound was riding high wasn’t good news for some of our companies. BMW cited it as its biggest headache when it owned the now-defunct Rover.

But we got more sangría for our cents when we were abroad and that jollied us along quite nicely.

So, while it suited us, all those highfalutin arguments about sovereignty and the historic attachment to the pound were hunky-dory.

Things are beginning to change. The pound has gone from a strapping, muscle-bound hunk of a currency, kicking sand in the eyes of the Euro, to a seven-stone weakling. Back in 1999, a quid would have got you €1.75. Now it’s closer to €1.25.

Thousands of Poles who came to live in Britain when Poland joined the EU are now leaving Blighty. One reason is that the pound was worth 7.19 zlotys four years ago. Now it’s more like 4.5, so their spending money back home is much lower.

Meanwhile, all those pensioners who left Britain for sunny Spain are finding that their cash is not going anywhere near as far as it did.

Back at the beginning of his premiership, a lot of Tony Blair’s pals begged him to hold a referendum on the Euro. He was mega-popular then, of course, and they thought he’d be able to talk the country into it.

But he didn’t take the risk. As time progressed, the likelihood of the country voting to dump the pound sank.

Gordon Brown was never much of a Euro enthusiast. So the issue seemed to be dead.

However, three-quarters of our foreign holidays are spent in countries that use the Euro – and being hit in the wallet has a bigger impact on opinion than anything else.I went into Stockport town centre to ask people what they thought for a Channel M News report.

It was completely unscientific, but opinion was split down the middle. Not long ago, I suspect it would have been heavily against dumping the pound.

If you could rely on a Labour government for anything in the past, it was a Sterling crisis. The Attlee government devalued the pound in 1949. Wilson did the same in 1967. We had soaraway inflation and went with a begging bowl to the International Monetary Fund under Jim Callaghan in 1976.

Then, I suspect, most people would have rejoiced at a chance to dump the pound in favour of a more stable currency.

One thing the pro-pound lobby says is that if we keep our currency, we keep control of our destiny.

That sounds all very sensible until you really think about it. Attlee, Wilson and Callaghan had their own currency. But the financial markets were far stronger than their democratically elected governments and their entire economic policy was undermined.

John Major found that, too, in 1992 when speculators such as George Soros showed who really had power when Sterling was forced out of the European exchange rate mechanism.

Thank goodness for the dollar. If the pound is weak, the American currency is positively feeble.

It’s nearly two dollars to the pound. If going through passport control into the States wasn’t such an ordeal, I’d toy with going there for a holiday.

Richard Butt edits Channel M’s early evening news – every weeknight from 5pm