A letter to the Daily Telegraph which was published on 30th May 1998.

Sir Leon Brittan may believe that, as he told a recent Tory Party fringe conference, “no-one in Europe wants a Federal Europe”, but this sentiment has to be set against what British politicians have said, and what has actually happened.

For instance – Sir Harold Wilson: “There was a threat of monetary union, and that has now been removed” (1975 Referendum leaflet); Mr Selwyn Gummer: Monetary Union “is not on the agenda” (Today Programme 1995); Mr Kenneth Clark (Today Programme 1996) brushed aside the issue of the transfer of Britain’s gold and foreign currency reserves to the European Central Bank in Frankfurt, when this is explicitly required by the Maastricht Treaty protocol (articles 30 and 42).

Most British people prefer to judge by what influential Continentals say about the EMU project, which is after all their baby – Hans Tietmeyer (Governor of Germany’s Bundesbank): “A European currency will lead to member-states transferring their sovereignty over financial and wages policy as well as financial affairs.  It is an illusion to think that states can hold on to their autonomy over taxation affairs”; Karl Lammers (Chancellor Kohl’s spokesman): “EMU is the central part of the project for European unification”; the Vice-President of the Bundesbank: “of course a country which merges its currency completely cannot remain independent politically” (Today Programme 1990).

As for currency stability, Sir Leon talks parochially as if European parities were the only ones that mattered.  Had we stayed in the ERM after 1992, the pound would have gone almost to two US dollars, a rate which would have bankrupted many British companies, such as Rolls Royce Aero Engines, with export sales priced in dollars.  Over the last four years, the German mark and the other currencies have devalued against the dollar by around 16%, helping their current economic recovery, while the pound has remained essentially stable against the dollar.  Currency parities are ultimately indicators of economies’ trading strengths.  Attempts to remove these indicators for all time are as vain, and dangerous, as removing a pressure gauge from a boiler.

A letter to the Editor of the Daily Telegraph which was published on 16th October 1997.

Even if Vauxhall now disowns the remarks of Mustafa Mohatarem, an American citizen and employee of General Motors (report, Oct. 15) that “a lot of manufacturing jobs that are tied to sales in Europe are tied to Britain joining EMU” there is still undoubtedly an orchestrated campaign by sectors of big business to push Britain into abolishing its own currency.

The remarks underline not only the deliberate eliding of the different concepts of common market and common currency, but also bring into sharp relief the practice of foreign businessmen interfering in British politics.

One wonders if Mr Mohatarem will now be sent to Canada to tell the Canadians they must abolish their currency so that General Motors will continue to manufacture cars there for the North American Common Market, or to Mexico where GM are busy building plants.

The fact is that all the major car manufacturers, including Ford and BMW whose UK chairmen have also been giving us the benefit of their “advice”, invest globally for global markets irrespective of currencies: car engines come from Brazil to Europe, and go from Britain to the rest of the world, not just Europe.

The bosses of the car companies know this perfectly well, but neither economics nor consistency have ever been corporate businessmen’s strong suit: a year or so ago their view was that the pound would be weak compared with the euro, now they are all afraid that the pound will be too strong.

In 1990 they were virtually unanimous that Britain should join the ERM: two years later they were delighted at the fall of the pound relative to the mark when Britain left the ERM.

In 1996 Sir Michael Perry, then chairman of Unilever, was asked by the House of Lords European Committee what action Unilever would take if Britain did not join the single currency.  He replied, “We operate throughout the world with governments and economic conditions which vary . . . we would not change anything we do”.  Car manufacturers will continue to do exactly the same, whether Britain is in or out of EMU.

A letter to the Editor of the Financial Times which was published on 7th September 1996.

The assertion by Mr Tony Hales and fourteen other company executives (Letters, 5 Sept.) that Britain’s likely refusal to abolish the pound sterling is based on a “serious misunderstanding of the process of monetary union” is clearly based on their own misunderstanding of the Maastricht Treaty.

It is not true, as they say, that “many aspects of monetary union remain to be resolved”.  If they would take the trouble to read what they pronounce on so confidently they would find that all the important provisions of monetary union are set out in black and white in Articles 2 and 102-109 and in 12 protocols of the Treaty.

Protocol 3 alone runs to nine chapters and 53 articles.  In protocol 3 the operation and constitution of the European Central Bank, the handover of our gold and dollar reserves, which belong to the British people (Art 30), the capital subscription (£700M in our case) (Art 28), the transition arrangements including exchange and issue of bank notes (Arts 16, 52 and 53), membership of the Bank’s Executive Board (Art 50), its governing council (Art 11), the Bank’s responsibilities (Art 12) and so on are all completely laid down.

Only the name of the currency and the location of the Central Bank were left open and these have now been decided.

In November 1991 a similar group of CBI executives wrote to the Times saying how important it was for Britain to stay in the ERM.  A year later, after White Wednesday, they were writing to say how important it was to keep open an option to re-enter the ERM.

Four years on, after 800,000 lost jobs and £30Bn of lost output, from which we are only now slowly recovering, they are at it again.

A letter to the Daily Telegraph which was published on 1st November 1993.

It was written by Lord Stoddart of Swindon (Labour Life Peer and Chairman of the Campaign for an Independent Britain), Sir Richard Body (Conservative MP and one of the Maastricht rebels) Austin Mitchell (Labour MP and vice-chairman of the Campaign for an Independent Britain), Professor Stephen Bush (vice-chairman of the Campaign for an Independent Britain), Dr Martin Holmes, Norris McWhirter, Lord Jay, Ron Leighton (Labour MP), Sir Teddy Taylor (Conservative MP and one of the Maastricht rebels), Dr Alan Sked (first leader of UKIP), Peter Dul (Anti-Common Market League) and Charlotte Horsfield (The British Housewives’ League).

Today the Maastricht Treaty comes into force and all British citizens are, without their consent, thereby conscripted as citizens of the European Union with obligations yet to be defined.

Many British politicians, including those on the Conservative and Labour front benches, appear to believe that with Britain’s exit from the ERM last year and the ERM’s virtual collapse in August, the Maastricht Treaty is essentially a dead letter. They could not be more wrong.

Despite the well publicised misgivings in Germany and France, the European Commission is determined to extract the absolute maximum from the authority over member countries which the Maastricht Treaty gives them.

Under Article 103, the Treaty requires member countries to submit national accounts for inspection by the Commission and to co-ordinate their economic policies, striking at the heart of Britain’s freedom to sustain its fragile recovery.

We, who have been consistently opposed to the imposition of the Maastricht Treaty without the explicit approval of the British people, will continue to fight its implementation. Instead, we aim for a self-governing Britain that will regain its freedom to trade unhindered with the whole world, including the Pacific Rim countries, with many of whom we have unique ties of history and language.

A letter to the Editor of the Times which was published on 4th November 1992.

I wonder how many of the 27 luminaries of the CBI who write today advocating ratification of the Treaty on European Union have actually read it.  One would hope that they have brought to bear on the treaty the same exacting scrutiny which they bring to bear on their companies’ commercial agreements.

Your correspondents say that while “early re-entry to the ERM is not likely to be feasible . . . we should not close off the option to re-enter”.  Do they not realise that the central purpose of the treaty (Article G, Title VI) is monetary union, that membership of the ERM is the first stage and that the second stage to which the treaty legally commits this country begins on January 1, 1994, less than 14 months away. Despite Britain’s theoretical option to defer a decision on full monetary union in Stage 3, under Stage 2 we will be bound to adopt convergent monetary (largely deflationary) policies which run flat counter to the new policy of economic growth.

Again, contrary to their letter, the Maastricht treaty articles do not add appreciably to the framework of the single market: these are provided for in the Single European Act (1986). Where the treaty does have an additional effect on the market is in its provision (Articles 130a-d) for the setting up (before December 31, 1993) of a new cohesion fund whose central purpose is to transfer large sums of money (so-called structural funds) from the rich north to the poor south of the Community.

In other words, countries like Britain will pay subsidies to other countries like Portugal and Greece in order that they will be able to compete better with us. On current EC plans these transfers double Britain’s present EC contribution of almost £3 billion.

Is this what the CBI wants?

A speech to the Staffordshire Moorlands Democratic Conservative Association at Leek on 5th October 1992, “The Real Alternative to Rule by Brussels”

Themes

• Bankruptcy of Political and Economic Class
• Delusion about Europe
• Fundamental Nature of Economic Crisis
• Primacy of manufacturing as a source of gain in standards of living
• Means of achieving change

1        Introduction

1.1      The present crisis is more fundamental than just a currency and economic crisis.  It is in fact the symptom of the bankruptcy of the British political class to understand the world we live in and what to do about it.  The leaderships of Conservative, Labour and Liberal-democrat parties have been at one in upholding the Government’s strategy – if such it can be called – of maintaining Britain in the ERM and ratifying its political analogue, the Maastricht Treaty.  This strategy has been upheld also by quasi-political bodies such as the CBI and the Institute of Directors, and also by the Treasury, the Bank of England, practically all the chairmen of our major companies, and all but a handful of economists.  Despite the complete disaster which their opinions have inflicted on our country, none of them has had the grace – so far – to acknowledge they are wrong.  Instead they choose to blame other people, or things – the Germans, the Bundesbank, the workings of the ERM – thus further heaping shame and humiliation on our country and people.

As someone who has lived and worked abroad in many Western countries, I have long held the view that Britain is the worst-governed of the major Western countries – that Britain has survived in spite of (not because of) the political class and what may be termed the corporate business establishment.  The fundamental reasons for our misgovernment – both in plentiful evidence at the moment – are firstly, the all-pervading liberal philosophy which acts as if the world conformed to its illusions about other people’s good intentions, and secondly, the shear elementary incompetence of the higher Civil Service and their political masters when measured against the requirements of the job.

1.2      Thus in his memoirs Nigel Lawson is not only unrepentant about his attachment to the ERM, he apparently continues to believe that the Continental political classes would be content to leave it at that – a form of local Bretton Woods arrangement.  The fact is that Continentals have always seen the ERM as the first, most vital stage on the way to currency union which in turn is the keystone for political union, as confirmed once again by a leading member of the Bundesbank Council in London recently.  Lord Lawson’s illusion about the purpose of the ERM is but one particular example of the delusion which still, despite everything, grips government and opposition alike, to the amazement of every single foreign commentator here, on the Continent and in the USA, namely that the Continental Political Classes are not really serious about political union.  The fact is they are – the Schumann Plan, the Treaty of Rome, the Single European Act and the Maastricht Treaty are all designed to lead to that end.  Each of these steps follows a path laid out in 1943 by Jean Monnet, the father of the EC, and documented line by line in his memoirs, which have been available in English since 1978.  Thus in the preface to the Coal & Steel Community Treaty (Schumann Plan 1950), which Monnet largely wrote: “Europe must be organized on a federal basis.  A Franco-German Union is an essential element . . .”  It is deceit and wilful folly by British politicians to pretend otherwise.

1.3      That the British Civil Service is good at administering rules, writing elegant position papers about our decline and running committees is widely acknowledged abroad.  That the Westminster parliament can, on occasion, be an impressive expression of democracy is also understood.  But the key, absolutely central issue – on which everything else depends is our country’s ability to sell abroad at least as much as it imports.  It is as vital to win the industrial battle as it was to win the battle of El Alamein, whose 50th anniversary we remember this month.  Quite literally in comparison nothing, but nothing else, really matters and has mattered for at least 70 years, since the end of the First World War.  Economic failure between the wars was the root cause of our weakness in 1940 just as it is the root cause of the crisis today.  The vast majority of the higher Civil Service have nothing to contribute to repairing this failure since they have no expertise in manufacture, which is at the heart of our failure.  It is as if the chauffeurs were in charge of repairing and redesigning the car.  The ignorance level is truly amazing.  Thus a senior Treasury official, reflecting a widely held view among economists, was quoted recently as denying that manufacturing was important to Britain – giving Switzerland as an example of a service based economy.  In fact Switzerland’s manufacturing exports output per head are three times Britain’s.  On the input side, its share of Nobel Prize-winners per head of population in the last 25 years is the highest in the world.

Why is manufacturing the key?  To answer this we have to ignore macro-economic analysis which dominates media comment and look instead directly at the physical world.

2        Essential Elements of Wealth

Broadly speaking people actually want, are prepared to pay for and measure their standard of life by, five categories of product: shelter, clothing, food, transport and entertainment.  Services such as banking, insurance, government are not wanted in themselves, but as means to obtain these five.  Education and health are conspicuously not services people in this country expect to pay for – but things they put up with as a means to the five categories of tangible wealth.

The first four of these products consist essentially of tangible and therefore tradable goods (although housing materials like bricks are unlikely to be exported).  Modern entertainment (including tourism) depends increasingly on three of the other four.

Now, again broadly, it is increases in the efficiency with which tangible goods are made which provides the real increases in our standard of living and therefore real growth in the economy.  Our ability to make more for less is what growth actually boils down to.  Where does this ability come from?  On the whole, labour is much the same as it was – people work at about the same rate (indeed some elements such as bricklaying rates have gone down).  Where there have been quoted increases in labour productivity, such as in telecommunications and in the mines – it is usually due in the main to investment in improved technology.

Accepting these simplifications for the moment, we can see that industrial products with the central element of manufacture are basically the sole source of increased wealth in an economy.  Every activity not directly connected with the technology, production and marketing of industrial goods is, in business terms, an overhead.  Proof of this is easy to see: since 1980 labour costs have risen by two to three times; the cost of a technological product like steel or plastic is much what it was then (meaning the real price has more than halved); the cost of electronics goods such as computers has dropped phenomenally in real terms.  Taken over a wide range of products, real cost reductions for industrial goods average out at something like 6% per annum.  It is this real cost reduction which pays for the so-called growth in the economy as a whole.

3        Source of Britain’s Economic Problems

If a country’s real wealth is dependent on its industrial output then the proportion of the national workforce working in industry (including agriculture and fishing) will determine this overall rate of growth when it is in competition with other countries employing much the same technologies.  For Britain, the proportion is about 30% while for Germany it is about 40%.  This means that for equal efficiency improvements in their industries of say 6% mentioned above – in Britain this is spread over the remaining 70% of the population – giving about 2% overall (which we actually achieved in 1981-88) – in Germany it is spread over a smaller number of overheads – giving growth of about 2.5% per annum.

Now this is on the assumption of equal improvement rates.  Because Germany’s industry is bigger – about one and three quarter times bigger than British industry – it is very unlikely that Britain’s improvement rate can be as great as Germany’s – and the gap will increase between the real output of the two economies.  This effect is not a result of financial policies, Bundesbanks, and other economic tinkerings – it follows directly from the fact that our industry is too small for the population it is called on to support.  The attempt to maintain a fixed parity, let alone a common currency, can only result in unemployment in Britain being permanently on a trend above that of its major competitors, as nature adjusts the buying power of the British population to that which its wealth generation represents.

Not only has this unavoidable adjustment since the 1970s been concentrated on those who have lost their jobs, the job losses have been concentrated on those who actually produce the real tradable wealth in this country to such an extent that there is now one person in financial services for every three in manufacture.

4        Means of Achieving Change

The first act is to recognise that we are not, repeat not, dealing with something that can be corrected by fiscal or monetary means.  Proper policies are needed for these areas, of course, but what we need is a physical expansion of British industry by about one third to match the current proportions in Germany.

We have to grasp the nature of our problem.  Much of our industry is as efficient as any, some of it (pharmaceuticals) is world class, but we simply do not have enough divisions in our industrial army.  Left to itself, British industry will continue to contract faster than its competitors – as it has done under every government since the war.  With the noticeable exception of firms in the pharmaceuticals industry, no major British manufacturing company has managed to expand its output in real terms for many years.  Our so-called “Captains of Industry” are, at best, just that – captains, able perhaps to perform tactical manoeuvres, but seemingly incapable of mustering the generalship to lay the long-term foundations of success stretching forward in time.

We will need therefore to approach our problem with all the seriousness of a world war.  In 1940 the British army escaped from the Continent without weapons, rather as our economy has just escaped from the ERM – but as Winston Churchill reminded a nation euphoric with relief: “Wars are not won by evacuations”.

Likewise we must organise ourselves to reoccupy the industrial territory we have evacuated in the last 30 years.   This will have to be done on two fronts:

• by reducing imports and
• expanding exports and production for home consumption.

4.1     Reducing Imports

I believe imports of consumer goods will have to be restrained by quota for a period of say five years, or by the most massive campaign in which buying a foreign, especially German product, where a British product is available, is seen as a deeply unpatriotic act.

I believe that the major chain-stores, which account for most of the retail business, must be leant on to adopt the type of British ordering policy which Marks & Spencer have developed, where suppliers are helped to achieve the quality required by the store and they build up a long-term relationship which, provided quality is maintained, is difficult to displace.  Most of the other chains clearly do not do this, but scour the world for bargain basement short-term deals to give a temporary advantage over their rivals.

4.2     Expanding Production

It is total nonsense to say, as the present Government does, that nothing can be done because of the world recession.  In fact Britain, having the world’s largest manufacturing trade deficit per head, is in the perfect position to set about expanding home production, first for import replacement – then (later) for export.  Note that construction per se is a net importer and therefore not the industry to lead the country out of the slump though it may play a part later.

In order to increase our industry to Germany’s proportion, will need a massive increase in investment of about £15 billion over say 8 years to 2000.  Large though this sum appears, it is only about £250 per person per annum.  It is only about one quarter of the £120 billion say that Germany is paying for reunification.  The British people will make this small sacrifice of current satisfactions if they are offered a battle plan for success.

4.3     Where the money could come from

The present cost of EC food levies is about £10 billion (over and above what the farmers receive), the budget payment to Brussels is about £3 billion (increasing to about £5 billion under Maastricht).  So £13 billion of the £15 billion per annum needed is there for the taking by withdrawal from the EC.  The remaining £2 billion can be obtained by a levy on financial institutions.

4.4     How could the money be deployed

Entirely new institutions will be needed, but the basic idea is that this money should not be in the hands of Captains of Industry, who have generally failed woefully to justify the scandalously high salaries they have awarded themselves.  At this stage it is only necessary to remark that there are about 250,000 qualified engineers and manufacturing managers who are either wholly or partly unemployed.  There is the resource we need to tap for the second British Industrial Revolution.

5        To Sum Up

a          The current crisis is the symptom of a fundamental problem. 

b          It is not self-correcting with any of the measures the political and business establishment understand.

c          Integration with Europe will make matters worse and only withdrawal from the EC will give us the freedom and cash to implement the needed measures.

d          Because of its incompetence the political and business establishment cannot undertake the huge change required.

e          New institutions are therefore needed to superintend the major industrial expansion needed.  A new political forum is therefore needed to explain matters to the British people and gain their support.

6        Why should they listen to me?

Qualifications for talking to you on these fundamental themes:

1          Twenty-one years ago I made a small contribution to a little booklet entitled “British Business for World Markets”, where we pointed out inter alia that the EEC was not a free market but a managed market, that this would imply massive direct and indirect costs for Britain, that the EEC would imply a substantial loss of market share in engineering, that the Commission would turn Europe into a bureaucratic parade ground.

            If we were wrong it is only in the modesty of our predictions.

2          In the last decade since I returned to this country from 6 years’ work with ICI Europa in Holland and Belgium, I have consistently attacked, in the national media, the defeatism of our political establishment and its attachment to Europe as a substitute for thinking about and solving Britain’s economic problems.

3          I believe there is No Middle Way between political extinction in a European Union and sovereign independence – booklets I have published on this theme and “The Meaning of the Maastricht Treaty” spell out the reasons, which are amply supported by Continental politicians and civil servants.

A letter to the Editor of the Daily Telegraph which was published on 17th September 1992.

The present sterling crisis is more than the currency crisis which commentators are describing it as. It is, in fact, the symptom of the bankruptcy of the present political class to understand, let alone do anything about, the real economic needs of our country.

The leaderships of the Conservative, Labour and Liberal-Democrat Parties are at one in upholding the Government’s strategy – if such it can be called – of maintaining Britain in the ERM and ratifying its political analogue, the Maastricht Treaty.

In fact, the only opposition to the Government comes from those who have been calling for a complete change in European policy away from tighter union and towards an open trading system with both Europa and the wider world.

The way out of the current slump in Britain is not through an artificial consumer-led recovery, on which, until today Mr Major and Mr Lamont have pinned their hopes, but through an all-out export drive by the manufacturing industry, triggered by a floating down of the pount to around its real value in the world, namely 2.5 Dm and $1.6.

But, of course, this is a real economy argument not a City argument which is all this Government seems to understand.