A speech at the first Goldsmith Memorial Lecture on 22nd May 2007, at University College in London.

To read the text please click on the link to the “Governance of Britain” page of the Britain Watch website.

A letter to the Daily Telegraph which was published on 10th June 1997.

David Heathcoat-Amory is surely right in saying that the Conservative Party must commit itself to finding a different relationship with the EU (article, June 6).  But he fails to follow through his own analysis.

Only repeal of section II of the European Communities Act 1972 which establishes the superiority of European law over British law will make any real difference.  Such repeal would effectively signify our withdrawal from the EU as Mr Heathcoat-Amory would surely recognise: repeal of the Single European Act and the European Communities (Amendment) Act (Maastricht) would logically follow.

It is only from the vantage point of withdrawal that Britain can establish a “position of free trade and co-operation between sovereign states” which as Mr Heathcoat-Amory correctly says so many in the country are waiting for.

But until they abandon their wishful hankering for impossibilities and come out clearly for EU withdrawal, no one will ever again believe Conservative leaders and their vague talk of “new relationships”, “tougher stances”, etc.  What they want is simply not on offer.  There is no middle way between withdrawal and absorption.

Letter to the Editor of the Daily Telegraph which was published on 13th December 1996.

As calls mount in the Conservative Party for the dismissal of the Chancellor of the Exchequer for his implied preference for abolishing the pound in favour of a foreign currency, there is an underlying assumption that it’s a pity because he is a rather good chancellor who has “delivered” growth with low inflation.

But much the most worrying feature of Mr Clarke is his inability to understand the economic system entrusted to his care.  Interviewed by John Humphrys on the “Today” programme (11 December) the lawyer Mr Clarke opined in his sweeping undergraduate way that “a currency is just a means of exchange”.

Just as he famously boasted that he hadn’t read the Maastricht Treaty, so the enormously complex system of “rights to buy” which money in its various forms represents – cash, deposits, bonds, overdrafts, etc – is airily dismissed by Mr Clarke rather as someone would dismiss the whole structure of our Law as “just a means of paying fines”.

Mr Clarke clearly actually believes that substituting the euro for the pound sterling is really just like having a different design of parking ticket.

Both he, and Mr Blair, need to have their attention drawn for example to Article 30 of the Maastricht Treaty Protocol establishing the European Central Bank (ECB) which will be responsible for the euro.

They can then explain to the British people when and how, should they get their way and abolish the pound, they propose physically to transfer to the ECB around £8,000 Million worth of gold and dollar assets, being Britain’s initial “contribution” to the new Bank’s foreign reserves.

They can also explain how, under Article 30.4, they propose stopping the ECB, should it be so minded, from stripping Britain of the remainder of its gold and dollar assets using the Qualified Majority Voting procedure laid down in Article 42.  And in case they are wondering, none of this is open to negotiation; it was all settled four years ago.

A letter to the Daily Telegraph which was published on 3rd July 1995.

In contemplating Lord Carr’s appeal for loyalty to Mr Major (June 30th), Conservative MPs should ask themselves what exactly they would be loyal to.  Economic and Monetary Union Stage 3 is not just about abolishing the pound, it is about total loss of control over every significant feature of national economic life.

Protocol 3 of the Maastricht Treaty sets out the basic tasks of the European Central Banks as (i) defining and implementing monetary policy, (ii) undertaking all foreign exchange operations, (iii) holding and managing the official foreign reserves of the Member States.  The latter provision means our handing over gratis all our national reserves of around £28,000 million to a foreign institution, over which, according to Article 7 of Protocol 3, we are specifically barred from having any influence.  Under Article 28, from which we have no opt-out, Britain is committed to paying on Jan. 1st 1999 about £700 million towards the capital needed to establish the European Central Bank.  Furthermore, Article 104c of the treaty provides that should Britain, having signed up to Stage 3, then fail to comply with a decision of the ECB, it can be required “to make a non-interest bearing deposit” or “be subject to fines of suitable size”.

Britain would be left with the financial authority of a charge-capped borough council.  How can any Conservative MP continue to support as Prime Minister someone who is apparently in two minds about whether or not our country should be obliterated as an independent nation?  John Redwood offers a clear break with the Major government’s incomprehension and muddle.

A letter to the Editor of the Sunday Telegraph which was published on 19th February 1995.

Before Sir Patrick Sheehy (Business, February 12th) writes another article advocating abolition of the pound, he should read the Maastricht Treaty, particularly Protocol 3, which defines the powers and constitution of the future European Central Bank.  He will see that, far from Britain having “more control of interest rates in Europe than we do now”, we shall have no influence whatsoever.

Article 7 of Protocol 3 says that “when exercising the powers and carrying out the tasks conferred upon them by this treaty and this statute, neither the ECB, nor a national central bank, nor any member of their decision-making bodies shall seek or take instruction from Community institutions or bodies, from any government of a member state or from any other body.  The Community institutions and bodies and the Governments of the member states undertake to respect this principle and not to seek to influence the decision-making bodies of the ECB and of the national central banks in the performance of their tasks.”

Thus, not only will government ministers be unable to even speak with the board of the European Central Bank, but the Chancellor’s much publicised meetings with the Governor of the Bank of England will actually be illegal.

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 Daily Telegraph by Mrs Gillian Bush, which was published on 11th June 1993.

“The Government listens too much to the pollsters and the party managers”, said Mr Lamont in his resignation speech (report, June 10th).  I submit that the Government, in fact, ignores the pollsters and only listens to the party managers.

If Mr Major had adjusted government policy in line with the results of polls and public opinion, he would now have allowed a free vote on the Maastricht Treaty in the House of Commons, or at the very least permitted a referendum.

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.