The phone call came mid-afternoon, one day at the end of January. Was I interested in details of a speech that Stephen Byers was planning to give the following lunchtime? The Secretary of State for Trade and Industry, I was told, was planning to say that the government was committed to a strict timetable for a decision on the euro, tighter than the previous formulation of “early in the next parliament”. This should, I was advised, be interpreted as a “positive” signal about the government’s intentions. And yes, I was assured, it had been cleared with No 10.
Next morning, I put out the story in my slot on Radio 4’s Today programme. Yet, by mid-morning, it was being denied by Downing Street. The speech itself, while making generally pro-euro noises, was blander than I had been led to expect. The following day, I happened to be visiting the Treasury and was offered some advice. “Next time, might we suggest that you consult us before doing a story on the euro,” I was advised. I insisted that the speech had been approved. “Wrong building,” came the answer. “Not by us.”
That, in microcosm, has been the story of the government’s tortuous euro wrangles over the past year. The other two Cabinet ministers who have shown themselves ready to stick their heads above the parapet, Peter Mandelson and Robin Cook, have suffered a similar fate to Byers. As one adviser put it: “They have had to adopt guerrilla tactics. They carry out isolated skirmishes, then they retreat into the hills.”
It has been a war by proxy. Whenever pro-euro business leaders see the Prime Minister, they are told that they should go forth and proselytise, with his blessing. But he does not join them. Even Britain in Europe, the main umbrella group, has been stymied from the start. Its very inception was flawed. Confined in its first year to “arguing the case for Europe” – whatever that means – rather than the euro, the organisation came to be seen as a limp tool of government. Only in May was it given “permission” to start doing what it was supposed to have done. The Rover debacle gave the government a chance to talk about the drawbacks of the high pound.
It was the problem of exchange rates that Mandelson tried to address in a speech to a GMB conference in Northern Ireland in May. The event was supposed to be low-key. Away from television crews, Mandelson made what he presumed was a statement of the obvious: that the competitiveness of British industry could suffer “as long as we are outside the euro”. That observation led to a torrent of denunciation from the Treasury. Yet the speech had been read by No 10’s strategic communications unit, and nobody there saw anything contentious in it. To head off any further Treasury anger, Cook was told in June to omit crucial passages of a Commons speech, just as he was getting up to speak. But it had already been released. Thus another minister was shot down by the Treasury.
Finally, in the first week of July, Blair decided it was time to sound more positive. The occasion was supposed to be his appearance on the BBC’s Question Time. While insisting that he would not “bend” on the tests, the Prime Minister said: “Provided the economic conditions are met in the next parliament, we will recommend going in, and there will be a referendum.” Tellingly, and without a hint of the Chancellor’s studious neutrality, Blair added: “If we carry on this way, I believe we will be able to make a recommendation early in the next parliament.” It was an important shift in rhetoric. It was drowned out by two other events that day: the Euan Blair Leicester Square episode, and Cook’s unscripted remarks about British membership of the euro being “inevitable”. On that occasion, an angry Blair was happy to oblige when Gordon Brown asked him to rebuke Cook.
Just before the summer, a meeting was held and a truce agreed. Cook, Mandelson and Byers would be allowed to put the case for membership of the single currency in principle. Brown was satisfied that the sacred elements of the policy – the five economic tests – would be reiterated by all at every opportunity. They have since stuck to the script. But will it hold? The party conference will provide important clues. More important still will be the outcome of the Danish referendum on 28 September, with polls showing the “yes” and “no” camps neck and neck.
The medium-term strategy is clear. Efforts will be made to keep rows to a minimum. Blair will use a speech planned for 6 October to reply to the controversial visions for Europe outlined this summer by Germany’s foreign minister, Joschka Fischer, and the French president, Jacques Chirac. It will be mostly about enlargement and about reforming European institutions. But on the currency itself, the Prime Minister is unlikely to dwell.
All this leaves the pro-euro camp in bad heart. There is little sign that Blair, despite his tentative forays in July, is ready to risk the wrath of the tabloids at a time when both the euro’s exchange rate and its standing in the polls are lower than ever. Nor is he prepared to confront his Chancellor.
During the general election campaign itself, as the man in charge of strategy, Brown will do his utmost to close down the issue. Swipes will be made at the Conservatives’ outright hostility, but do not expect the Chancellor to hand the floor to Cook or others at the morning press conference when the subject is raised. By that point, Cook will be hoping against hope that he will be allowed to stay in his post for a second term, and will be wary of rocking the boat. Mandelson, vying for the same job, will be fastidious in adhering to the line.
Indeed, the choice of foreign secretary after the election will provide the first clue to the strength of the Blairite will. Opting for Mandelson will be seen (not least by the Brownites) as a direct challenge to the Chancellor’s hegemony on the euro. If Blair sticks with Cook – unlikely, but not out of the question – that message would be diluted. Cook’s enthusiasm for the euro is just as strong as Mandelson’s, but his influence where it matters is not. Brown appears to hold all the cards. It is a prospect that exercises the Blairites. “He has effectively kidnapped our single biggest policy for the next parliament,” confided one minister.
And, in many senses, the minister is right. The mechanics of the five tests give the Chancellor a stranglehold over the policy. His officials, and his officials alone, will make the actual determination. Suggestions by outside economists have been rejected. This gives Brown control over the how, the whether and the when.
How will the Chancellor use this power? Blair would dearly like to be at “the heart of Europe” and knows that, for all the rhetoric, this can never be so until Britain is in the euro. Moreover, the Prime Minister is still looking for the one decision that will define his place in history.
Brown’s motivations are equally political, in their way. He will have no part in any decision that remotely threatens, even only in the short term, a robust economy; and he will have no part in a decision that remotely damages his own prospects. As for the “future of Europe”, this champion of American values can take it or leave it. He usually beats a hasty retreat from Ecofin meetings of European finance ministers as soon as they break up; not for him the schmoozing, deal-making and consensus-building that is a staple in Brussels. And the marginalisation of Ecofin – as the big decisions are taken by meetings of the 12 countries that are in the euro – merely adds to his scepticism.
Thus the Brown position is a happy coincidence of territory, principle and tactics. He resents other ministers stepping on his turf. The more he has seen of the performance of the euro and the British economy, the more his resolve to hold the line on the currency has strengthened; and he sees no political capital in budging. So when the time comes for a decision, soon after the election, this most political of Chancellors will be able to portray himself as having been studiously neutral.
If he feels that the time is not right to join the euro, Brown will ensure that the word is out well in advance. (Some of those around him are already suggesting that Britain may not go in at all.) If, on the other hand, he feels it is a risk worth taking, he will be able to sell it as an “objective” decision, without a hint of embarrassment at what some might like to portray as a U-turn. This is the most powerful veto that No 10 has ever given away on Europe.
The writer is a political correspondent for the BBC and biographer of Robin Cook
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