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Newsroom & speeches
27 February 2003
Mr Chairman
Following our September submission, it might be helpful to update the committee about the 4 additional studies that make up the 18 studies that will be published at the time of our euro assessment
The first additional study is on the transition to the euro. Transitional issues are a key part of the analysis, as recognised by outside commentators, and we need to understand what might be the implications of a transition to EMU as part of the requirements of sustainable and durable convergence.
The second additional study is a paper explaining the overall framework for the five tests assessment. This study will cover the economic literature on optimal currency areas and monetary union in practice and in light of the overall framework for the assessment of the five tests will consider the approaches of other countries and institutions to the question of EMU membership.
The third additional study will bring together specially commissioned papers by a wide ranging group of international academics on aspects of British membership of the euro.
The fourth additional study is on the exchange rate and macroeconomic adjustment. This study will assess the extent to which an independent currency helps the economy adjust to macro economic imbalances and the extent to which exchange rate volatility contributes to imbalances, as is sometimes claimed. It will consider both theoretical and empirical evidence and will inform the assessment of all five tests, in particular the convergence, flexibility and growth tests.
As we move to the completion of each of the 18 studies which constitute the technical and preliminary work – and which are intrinsic to the coming assessment of the five economic tests – I can tell the committee we are on track to complete the assessment by June.
I should also tell the committee that with preparations for entry continuing under the National Changeover Plan, the total invested on changeover planning now amounts to £36.8 million. More than 1.4 million businesses have received our most recent euro preparations leaflet and business to business case studies have been published across a range of sectors, from machine tools to retail.
Finally, the European economic reform White Paper - which refers to the convergence and flexibility tests - suggests that in a world where businesses and employees must respond quickly to global change, Europe has been too often unwilling to go beyond old assumptions that flexibility is the enemy of social cohesion and I believe it important that we recognise that a single market and single currency work best when flexibility in labour, product and capital markets is greatest.
Some people say that a successful single currency requires tax harmonisation or federal tax and spending arrangements.
I disagree.
And I can say that following the first draft of the convention text and the results of the convention working groups, we will continue to vigorously oppose proposals in Europe for qualified majority voting on tax and for tax harmonisation that would harm UK interests. We will not accept the federal approach to economic policy just as we oppose proposals contained in the text for a federal approach to foreign policy.
Can I also update the committee to state that following discussions in Europe we look forward to changes in the interpretation of the Growth and Stability Pact. We look forward to proposals from the ECB itself on the conduct of the monetary regime in Europe. And I can tell the committee that we are currently discussing in detail with partners in the EU reforms in Europe to:
…to create more flexible economies. And my Budget will reflect progress on many of these important issues
I thought the committee, which holds hearings on appointments, would like to be the first to know of the new appointments to the Bank of England that are being announced this morning:
To succeed Melvyn King as Deputy Governor, the Permanent Secretary to the Department of Transport Rachel Lomax has accepted appointment
Christopher Allsop has agreed to chair a wide-ranging review of the statistical requirements for monetary and wider economic policy making -- jointly reporting to the Governor of the Bank of England, the Chief Statistician and myself -- so I am appointing Mr Richard Lambert of the Times, a former Editor of the Financial Times, to the vacant position on the Monetary Policy Committee and reappointing Mr Steve Nickell. Appointments to the Court of the Bank of England will be announced later.
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