A letter to the Editor of the Daily Telegraph on 8 October 2001 about the value of the City to the UK’s economic health

In his Brighton speech the Prime Minister proclaimed his wish to abolish the Pound Sterling in favour of the Euro provided Gordon Brown’s famous five tests were satisfied.  As one of these five tests concerns the effect on the City – the only section of the economy meriting such special consideration – it is instructive to measure just how important the City really is, particularly when there is so much panicky talk about our economic future in the wake of the horrific events of September 11.  Christopher Fildes in Business News 3 (Monday, 8 October) quotes the City as Britain’s “leading exporter” . . . “being worth in 1999 more than £30 billion a year to our balance of payments”.  This is a considerable exaggeration to put it mildly.

The figures given in the United Kingdom’s Balance of Payments 2000 (the Pink Book) show (Table 3.6) Financial Services exports at £6,992 million in 1999, (£3,711 million in 1992 – Table 3.5).  Even if you add on insurance services exports at £4,111 million you only arrive at £11 billion (rounded).  But the financial sector is not just a City business; Edinburgh and Bristol among others would claim a substantial slice of this £11bn.

These figures for the financial sector, about which we hear so much, may be compared for instance with “other business services” which total £17bn exports.  Technical services alone came to £5.9 billion, having grown from £1.4 billion in 1992, more than twice as fast as financial services.

Income from overseas investments is often conflated in the financial press with financial services income.  But here again, by far the greater contribution to the balance of payments comes from direct investment (£11.5bn in 1999), such as the oil companies, and has nothing to do with the City at all (Table 4.4).  The contribution to the balance of payments from portfolio investment (which may reasonably be attributed to the financial sector) in 1999 was £100 million having declined from a high in 1993 of £6,400 million (Table 4.5).  The City is not therefore the biggest exporter, still less the biggest net contributor to the balance of payments.  It does however have much the biggest press to the detriment of other sectors of the economy, which also merit attention at this time.

A letter to the Editor of the Daily Telegraph which was published on 4th June 2001 about the question for a referendum on the euro.

The Gallup poll on attitudes to abolishing the pound, reported Thursday and MORI’s (reported today), illustrate the importance of the wording of the question in any referendum on the issue.

Like the question proposed by Labour’s Foreign Secretary (reported May 27) Gallup and MORI seek a yes or no to “joining” or “membership of” or “being part of” the euro.  This question is doubly loaded.

First, these phrases will always tend to elicit a yes from the British because of their association with the word “club”, a concept invented by the British and widely used in other languages.  Manifestly a currency is not a club.

Secondly, to seek yes or no to a single proposition without stating the alternative is about as unbiased as asking the electors in the forthcoming election to say yes or no to the Labour candidate with no other name on the ballot paper.

The only unbiased way to decide the issue is to put the two propositions: (a) “keep the pound as our currency” and (b) “replace the pound with the euro”, on the ballot paper together and ask the voter to mark their preference with a cross, just as in the general election.

Judging by my own observation of posing the question to people either in the Gallup/MORI way or in the normal ballot paper way, the proportion in favour of keeping the pound rises from about 67% with the former way to about 80% with the latter.  If in a follow-up question you tell people that article 30 of the relevant Maastricht protocol on adopting the euro involves an irreversible transfer of about a third of our gold and dollar reserves to the European Central Bank in Frankfurt, with foreign control over the rest, the proportion rises to 90%.  Perhaps the Conservatives should re-read the Maastricht Treaty and tell the public about this now.

A letter to the Editor of the Daily Telegraph which was published on 6th July 2000.

Your correspondents (July 3rd) are right to suspect that some foreign car industry owners are using spurious arguments about the strength of the pound as an excuse for closing UK plants or squeezing subsidies out of the UK taxpayer.  For instance, BMW’s claim that it was “losing” £750 million a year was more than double the whole wage bill at Longbridge.

In round terms, only about £3,000 of a £10,000 ex-works price of a car is accounted for by car makers themselves.  Allowing for the import content of bought-in materials and components means that only about 50-55 per cent of the ex-works cost of a UK car exported to Euroland is subject to the UK/euro exchange rate.

Since launch, the euro has declined 11 per cent against sterling, making an adverse euro price difference of about 5.5 per cent – hardly commensurate with the huge noise currently being generated.  Moreover, the Nissan Sunderland plant last year had a commendable 20 car per man-year output advantage over competitive Continental plants, which translates to an offsetting advantage of about three per cent on a £10,000 car.

Before we all get swept along by the current furore from the foreign car lobby (from which Honda is notably absent) we should remember that the biggest market for most British goods is right here in the United Kingdom where, in many cases, the decline in the euro/£ rate has meant a welcome 11 per cent reduction in input costs.

While the Government has no control over exchange rates, it could control the proposed fuel cost levy.