The Government’s Policy on Economic and Monetary Union (EMU)
The Government's policy on membership of the single currency remains as set out by the Chancellor of the Exchequer in October 1997, and restated by the Prime Minister in February 1999.
In principle, the Government is in favour of UK membership of EMU; in practice, the economic conditions must be right. The determining factor underpinning any Government decision on membership of the single currency is the national economic interest and whether the economic case for joining is clear and unambiguous. If it is, there is no constitutional bar to joining.
As the Chancellor said in his October 1997 statement, the Five Economic Tests will define whether a clear and unambiguous case can be made. The Five Tests are:
- sustainable convergence between Britain and the economies of a single currency;
- whether there is sufficient flexibility to cope with economic change;
- the effect on investment;
- the impact on our financial services industry; and
- whether it is good for employment.
The Government has said that the Treasury will complete an assessment of the Five Tests within two years of the start of this Parliament.
The assessment has not yet started, but the necessary preliminary analysis - technical work that is necessary to allow us to undertake the assessment within two years as promised - is underway.
On the basis of the assessment, the Government will take a decision on whether the Five Tests have been met. If the Government recommends UK entry, it will be put to a vote in Parliament and then to a referendum of the British people. Government, Parliament and the people must all agree.
Practical information to help firms understand the business implications of the euro from its introduction in the Euro area on 1 January 2002 is on the Treasury's Euro website. This site includes factsheets, a self-analysis tool, case studies and other information which can either be downloaded from the site or ordered electronically. The site also includes copies of the First and Second national outline changeover plans.