Sir Stanley Kalms - 10/11/97

Mr Chairman, Ladies and Gentlemen.

First of all let me thank the CBI for their concession to democracy in allowing me to speak today. Having heard Adair Turner pledge CBI support for EMU in recent days I feel rather like a figure in a Bateman cartoon: the CBI member who said "no" to the Euro.

There are now less than 300 working days to the planned start of the single currency. We in business, and those in Government, must ensure that the dangers, as well as the alleged benefits of EMU, are fully assessed.

Let me state the dangers:

First, the single currency represents a huge stride towards a federal superstate

Second, increased regulation would impose further crippling burdens on business. Excessive power would reside in the hand of bureaucrats, lacking in democratic accountability.

Third, under the present ill-thought out criteria the whole project may well prove unworkable. The single currency represents the ultimate leap in the dark. As with the ERM fiasco, our economic performance could be seriously damaged. But this time round, we could not walk away from the mess.

And, finally, EMU would hold back plans to enlarge the European Union to include the countries of Eastern Europe; a region where stability is crucial to Western interests.

Let's consider EMU from a business perspective. However attractive I find a business proposition the ultimate test is to ask myself: "Would I be betting the company?". That is the crunch question, and if the answer even comes close to being "yes", the proposition is rejected. That is a cast iron rule of good business sense: We never bet the company.

And here today, as we assess the single currency, I would urge you to pose the same question. If we, in British business, enter monetary union, would we be "betting the company?". Ladies and Gentlemen, the answer is a definite "yes".

Let's look at the prospectus. The proposed time frame is an absurdity based on purely political factors. Come what may, the first wave of EMU is expected to begin in 1999. Already, in some countries, economic realities diverge from convergence targets: fudge, alternatively known as creative accountancy, has already begun.

The Europhiles would like us to join the so-called Leading Group - nations committed to participation in the single currency's first wave. This would be utter folly and I am reassured by Gordon Brown's decision to rule out taking such a rash and premature course of action.

Other supporters of EMU would sit out the first wave, but are eager to join early next century. All too often their boundless enthusiasm serves to obstruct the black hole of their case. They fail to offer a convincing justification for British participation.

Here, in Britain, this nation of shopkeepers is doing very well. Of all the inward investment flowing into the European Union a total of 40 per cent comes to Britain. Overseas firms, from the Far East and the USA, and firms from continental Europe, recognize the British advantage. Our combination of a sophisticated capital market, lack of prescriptive employment regulations, and balanced trade union laws serve to make Britain the enterprise centre of Europe.

UK PLC is a sound proposition. So why should our economy converge with the French, the German, or the Italian>

In truth Brussels is determined to blunt the UK's competitive edge by creating an economic level playing field. Where is the leeway for the entrepreneur? The market economy is based on finding imbalances in the market. It seeks lower costs, better skills, weaker or stronger currencies, subsidy or lack of subsidy. Capitalism seeks and thrives on variations in the market. Without the flexibility and stimulus, provided by variations, business would be placed in a federalist straightjacket.

Economies of the separate member states are able to thrive precisely because there are national variations in economic policy. If interest rates are fixed by a European Central Bank individual national circumstances would not be taken into account. An inflexible insistence on identical interest rates in Paris, in Frankfurt, in Lisbon and in London, could result in spiralling regional unemployment. Is regional labour mobility anticipated? Will the jobless be shifted or subsidised? Perhaps Mr Santer could let us know.

It is surely the case that national governments, with democratic legitimacy, are best equipped to assess the requirements of their own economies. With a single currency, the inevitable growth in central regulation would bring us much closer to a federal European superstate.

It is the role of the CBI to reflect the views of British business. But on this question the CBI hierarchy is unrepresentative. Most polls have shown that Britain's businessmen are opposed to a single currency. The latest Institute of Directors survey puts opposition at 70 per cent. It is true that CBI surveys have suggested a different picture but its polling methods have attracted severe criticism. I reject outright its methodology and conclusions.

EMU may well shave 0.1% off business costs due to the abolition of exchange rate commission, but, what's penny-wise today would be ECU foolish tomorrow. The CBI should not be hijacked by the 0.1% brigade.

The CBI leadership has claimed the highground in the argument to join EMU but it has failed to present the full picture. All we have is the golden scenario. The pro arguments are applauded, the cons are minimised, the debate is rarefied. On this subject the CBI has not earned the right to speak for British business. We are not at one.

Ladies and Gentlemen, membership of a single currency would be irreversible, irrevocable and irretrievable. The nearest analogy is castration: our voices may be pitched higher in the councils of Europe but only at the cost of our economic virility.

Europhiles, with their dreams of a grandiose superstate, will continue their attempt to dictate the agenda. But I urge British business to resist the pressure to join the federalist bandwagon.