Category: Economy

The statement made by Gordon Brown, the then Chancellor of the Exchequer, in the House of Commons on 27 October 1997.

With permission, Madam Speaker, I want to make a statement on Economic and Monetary Union.

Since the end of the Second World War Britain has faced no question more important and more contentious than that of our relationship with Europe.

Divisions within governments of both parties, and hence indecision, have made British policy towards Europe, over many years, inconsistent and unclear.

The economic consequences of these weaknesses have been a loss of international initiative and influence, recurrent instability and continuing questioning of our long-term economic direction.

To break with this legacy, and to establish clear national purpose, which has eluded us for decades, economic leadership is essential, and Britain must now make the difficult decisions on Europe, however hard.

The decision on a single currency is probably the most important this country is likely to face in our generation. Yet until now, there has been no detailed examination by government of the practical economic issues of EMU. There has been no proper preparation for a decision, because no previous Government could agree on whether they supported it in principle, nor whether there was an overriding constitutional objection on grounds of sovereignty or not; nor whether, even if a single currency worked and worked well, the Government would wish to be part of it. Forms of words like ‘keeping the option open’ – while no preparations were ever made to render the option practicable – have similarly served as a pretext for postponing the hard choices

Now is the time to make these hard choices and set a long-term direction for our economic future in Europe.

So I will deal, in turn, with the question of principle, the constitutional implications of EMU, and the economic tests that have to be met. In each area, I will set down the Government’s policy.

When we came into Government I asked the Treasury to carry out an assessment of the economic tests that have to be met. Accompanying my statement is this comprehensive and detailed Treasury assessment which I am publishing today, copies of which are available in the Vote Office.

ISSUES OF PRINCIPLE

I start with the question of principle. The potential benefits for Britain of a successful single currency are obvious: in terms of trade, transparency of costs and currency stability. Of course, I stress it must be soundly based. It must succeed. But if it works economically, it is, in our view, worth doing.

So in principle, a successful single currency within a single European market would be of benefit to Europe and to Britain.

Secondly, it must be clearly recognised that to share a common monetary policy with other states does represent a major pooling of economic sovereignty.

There are those who argue that this should be a constitutional bar to British participation in a single currency, regardless of the economic benefits it could bring to the people of this country.

In other words, they would rule out a single currency in principle, even if it were in the best economic interests of the country.

That is an understandable objection and one argued from principle. But in our view it is wrong. If a single currency would be good for British jobs, business and future prosperity, it is right, in principle, to join.

The constitutional issue is a factor in the decision, but it is not an over-riding one. Rather it signifies that in order for monetary union to be right for Britain the economic benefit should be clear and unambiguous.

So I conclude on this question of principle: if, in the end, a single currency is successful, and the economic case is clear and unambiguous, then the Government believes Britain should be part of it.

There is a third issue of principle – the consent of the British people. Because of the magnitude of the decision, we believe – again, as a matter of principle – that whenever the decision to enter is taken by government, it should be put to a referendum of the British people. So whenever this issue arises, under this Government there will be a referendum. Government, Parliament and the people must all agree.

So we conclude that the determining factor as to whether Britain joins a single currency is the national economic interest and whether the economic case for doing so is clear and unambiguous.

THE FIVE ECONOMIC TESTS

I now turn to the Treasury’s detailed assessment of the five economic tests that define whether a clear and unambiguous case can be made.

These are:

Whether there can be sustainable convergence between Britain and the economies of a single currency.

Whether there is sufficient flexibility to cope with economic change.

The effect on investment.

The impact on our financial services industry.

Whether it is good for employment.

I. Economic Cycles

Of these, the first and most critical is convergence: can we be confident that the UK business cycle has converged with that of other European countries so that the British economy can have stability and prosperity with a common European monetary policy? That convergence must be capable of being sustained and likely to be sustained – in other words, we must demonstrate a settled period of convergence.

Currently Britain’s business cycle is out of line with our European partners. Interest rates here are 7 per cent. This is the level the Bank of England has set in order to achieve our inflation target. But in Germany and France interest rates are close to 3 per cent. Across the continent, because business cycles are more coincident, short-term interest rates have been converging for some time.

This divergence of economic cycles is, in part, a reflection of historic structural differences between the UK and other European economies, in particular the pattern of our trade and North Sea oil. These differences are becoming less distinct as trade with the rest of Europe grows and the single market deepens.

But divergence is also a legacy of Britain’s past susceptibility to boom and bust: the damaging boom of the late 1980s and the severe recession of the early 1990s.

Since coming into office, the Government has introduced long-term measures to ensure that we are capable of maintaining stability by giving operational responsibility for interest rates to the Bank of England and by implementing our deficit reduction plan for public borrowing.

We will need a period of stability with continuing toughness on inflation and public borrowing. The Treasury’s assessment is that, at present, the UK’s economic cycle is not convergent with our European partners and that this divergence could continue for some time. To demonstrate sustainable convergence will take a period of years.

II. Flexibility

To be successful in a monetary union, countries will need even more flexibility to adjust to change and to unexpected economic events once the ability of countries to vary their interest rates and exchange rates has gone and the Euro and a single European interest rate are in place. Flexibility may be particularly important for the UK if there is any risk that our business cycle has not fully converged with those of the other EMU members.

The Treasury assessment of the second test is that, in Britain, persistent long-term unemployment and lack of skills – and in some areas lack of competition – point to the need for more flexibility to adapt to change and to meet the new challenges of adjustment. The Government has begun to implement a programme for investing in education and training, helping people from welfare into work and improving the workings of our markets.

Of course, other European countries need to tackle unemployment and inflexibility to make sure Europe as a whole is able to withstand any shocks that arise. The government will continue to argue that employability, flexibility and stronger competition policies must be a top priority so that monetary union can be successful.

III. Investment

The third test is investment: whether joining EMU would create better conditions for businesses to make long-term decisions to invest in Britain. The Treasury assessment is that, above all, business needs long-term economic stability and a well-functioning European single market. It concludes that membership of a successful single currency would help us create the conditions for higher and more productive investment in Britain.

But the worst case for investment would be for Britain to enter EMU without proper preparations and without sufficient convergence and with all the uncertainty that would entail.

IV. Financial services

The fourth test asks what impact membership of the single currency would have on our financial services industry. EMU will affect that industry more profoundly and more immediately than any other sectors of the economy.

The Treasury’s assessment is that we can now be confident that the industry has the potential to thrive whether the UK is in or out of EMU, so long as it is properly prepared. But the benefits of new opportunities from a single currency could, however, be easier to tap from within the Euro zone. This could help the City of London strengthen its position as the leading financial centre in Europe.

V. Employment

For millions of people, the most practical question is whether membership of a successful single currency would be good for prosperity and jobs. The Treasury assessment is that our employment-creating measures, and welfare state reform, must accompany any move to a single currency. Ultimately, we conclude that whether a single currency is good for jobs in practice comes back to sustainable convergence. A successful single currency would provide far greater trade and business in the Europe.

The Treasury assessment is that in vital areas the economy is not yet ready for entry and that much remains to be done. The previous policy of keeping options open, without actively making preparations, has left parts of the economy un-prepared.

Our overall assessment is that Britain needs both a period for preparation and a settled period of sustainable convergence. Both require stability.

THE GOVERNMENT’S CONCLUSIONS ON EMU

Applying these five economic tests leads the Government to the following clear conclusions.

British membership of a single currency in 1999 could not meet the tests and therefore is not in the country’s economic interests. There is no proper convergence between the British and the other European economies now. To try to join now would be to accept a monetary policy which would suit other European economies but not our own. We will therefore be notifying our European partners, in accordance with the Maastricht Treaty, that we will not seek membership of the single currency on 1 January 1999.

The issue then arises as to the period after 1st January 1999. We could simply leave the options open, as before, but with no clear direction either way for the rest of the Parliament. That would be politically easy but wrong.

There would be instability, perpetual speculation about “in or out”, “sooner or later”, which would cause difficulties in the financial markets and for business and industry.

It would make it harder to prepare for the possibility of a single currency because every step in preparation, every time the issue was discussed, would feed fresh bouts of speculation.

It must be in the country’s interest to have a stable framework within which to plan.

And we are fortified in this because on the economic tests we have set out, the practical difficulties of joining a single currency in this Parliament all point to the same conclusion.

There is no need, legally, formally or politically, to renounce our option to join for the period between 1st January 1999 and the end of the Parliament, nor would it be sensible to do so. There is no requirement under the Treaty for this. What is more, no government can ever predict every set of economic circumstances that might arise.

What we can and should do is to state a clear view about the practicability of joining monetary union during this period. Applying our economic tests, two things are clear. There is no realistic prospect of our having demonstrated, before the end of this parliament, that we have achieved convergence which is sustainable and settled rather than transitory. And Government has only just begun to put in place the necessary preparations which would allow us to do so. Other countries have for some years been making detailed preparations for a single currency. For all the reasons given, we have not.

Therefore, barring some fundamental and unforeseen change in economic circumstances, making a decision, during this Parliament, to join is not realistic. It is also therefore sensible for business and the country to plan on the basis that, in this Parliament, we do not propose to enter a single currency.

There are those who urge us to seek consent, in principle, in a referendum now or soon, but with a view to entering sometime later. Any serious gap between the referendum and the actual entry date would undermine the conclusions of the referendum.

Because the essential decision is economic, it can be taken only at a time when government and then the people can judge that sustainable convergence has been established.

So in our view the interval between the decision to join and our joining must not be unduly protracted.

PREPARATIONS

I have said that if a single currency works and is successful Britain should join it. We should therefore begin now to prepare ourselves so that, should we meet the economic tests, we can make a decision to join a successful single currency early in the next Parliament. At present, with no preparation, it is not a practical option. We must put ourselves in the position for Britain to exercise genuine choice.

The questions of preparation are immense – practical questions for business, as well as for government. Euro notes and coins will, for example, be circulating across Europe from January 1st 2002. Some companies, like Marks and Spencer, have already decided to prepare to accept Euros in Britain. Others, will want advice on what is best for them.

Because both the Government and business must prepare intensively during the next years, we will:

commence work on the detailed transition arrangements for the possible introduction of the Euro in Britain, including the introduction of notes and coins, should we wish to enter;

step-up the work on what business should do now to prepare for the introduction of the Euro in 1999, whether we are in or out; work with business on what government must do to prepare for EMU, should we decide to join it in the next parliament.

To help with essential preparations, I have invited the Governor of the Bank of England and Sir Colin Marshall, the President of the CBI, to join me and the President of the Board of Trade in leading a standing committee on Preparations for EMU. I am pleased to say that they have agreed. I am also inviting the President of the Association of British Chambers of Commerce to join us. I can also announce that, from January a series of regional and sectoral conferences on preparations for monetary union will be held.

Also, the Prime Minister has today decided to extend Lord Simon’s Treasury responsibilities to include European Business Preparations in the government, covering the long-term planning of the new standing committee.

In addition to these practical preparations, there are reforms we can take which are both right in themselves, in the national economic interest, and which will help us to meet the five economic tests.

We will promote greater flexibility in the UK economy and in Europe through our “Getting Europe to Work” initiative;

We will be introducing new competition legislation, which draws on the best of European and wider international policy and practice as well as continuing to negotiate to secure the best interests of our financial sector and for the opening up the single market in financial services.

We will set as one of the key objectives of our EU Presidency completion of the European single market.

In my Mansion House speech I said that if we succeed in strengthening the ability of the British economy to sustain growth with low inflation, and if international conditions permit, I would hope to lower the inflation target. So we will monitor our inflation target and do so in the light of the European Central Bank;

And we will ensure that our fiscal rules, and our deficit reduction plan, continue to be consistent with the terms of the stability pact, thus underlining our commitment to avoid an excessive deficit under Article 104c of the Treaty, and supporting greater coordination in ECOFIN;

In Britain’s interests, we need to keep inflation low and public borrowing firmly under control.

The single currency will affect Britain, in or out of it. It is in the British national interest for it to work. Vital decisions will be made during our EU Presidency in the first half of next year. We will use our position constructively and supportively and we will play a full part in ensuring its launch is successful – something that is in Britain’s interests as well as Europe’s.

CONCLUSIONS

To sum up:

we believe that, in principle, British membership of a successful single currency would be beneficial to Britain and to Europe; the key factor is whether the economic benefits of joining for business and industry are clear and unambiguous. If they are, there is no constitutional bar to British membership of EMU;

applying the economic tests, it is not in this country’s interest to join in the first wave of EMU starting on Ist January 1999 and, barring some fundamental and unforeseen change in economic circumstances, making a decision, this parliament, to join is not realistic;

but in order to give ourselves a genuine choice in the future, it is essential that the Government and business prepare intensively during this Parliament, so that Britain will be in a position to join a single currency, should we wish to, early in the next Parliament.

On Europe, Madam Speaker, the time of indecision is over. The period for practical preparation has begun. Today we begin to build a new consensus – modern and outward looking – for a country that throughout its history has looked outward to the world.

We are the first British government to declare for the principle of monetary union. The first to state that there is no over-riding constitutional bar to membership. The first to make clear and unambiguous economic benefit to the country the decisive test. And the first to offer its strong and constructive support to our European partners to create more employment and more prosperity.

The policy I have outlined will bring stability to business, direction to our economy, and long term purpose to our country. It is the right policy for Britain in Europe. More important it is the right policy for the future of Britain and I commend it to the House.

The speech made by Gordon Brown, the Chancellor of the Exchequer, on 20 October 1997.

Today’s launch is the most significant development that London markets have experienced since “Big Bang” 11 years ago.

“Big Bang” brought electronic share price information which enabled telephones and computers to replace face-to-face trading. Today’s event is a further step, perhaps an even more significant step – a fully-automated way of trading shares, first for FTSE 100 companies, but destined to expand.

It demonstrates the Stock Exchange’s commitment to the continuing technological evolution that is essential to maintaining London’s position as one of the world’s top three equity markets.

Staying ahead in today’s financial markets means constantly harnessing and adapting the power of rapidly advancing technology.

And today’s launch of the Stock Exchange’s electronic order book is about applying new technology.

But it is about something much more than that – it is about City firms and institutions working together to remain competitive and to help ensure that the UK economy remains competitive.

The City and the UK financial services industry require three other crucial ingredients:

first, a skilled workforce at the forefront of technical know how, but also retaining the expertise amassed over many generations and for which this country has become renowned – in trading, investment management, banking, corporate finance, the law, and accountancy;

second, a robust transparent and accountable framework of regulation that recognises the global reach of the modern financial services industry;

third, a stable macro economic backdrop against which the UK financial services industry can plan and compete.

Every measure we have set in place since May is designed to enhance the long term stability of the British economy so we can have sustainable levels of growth.

First, our monetary framework which includes independent interest rate decision-making powers for the Bank of England.

Second, our new fiscal framework at the centre of which is a five year deficit reduction plan which allows us to meet the golden rule in public finances.

Third, our plan to modernise the welfare state to create flexible labour markets matched by investment in education and employment opportunity.

Fourth, our European policy with our commitment to apply to Monetary Union the five British tests – the impact on jobs, investment and the City, ensuring flexibility and the convergence of the business cycles – to ensure the long term interests of Britain.

The Review I set up into Monetary Union will report conclusively to Parliament on the five British economic tests and the following issues:

the formal communication to our European partners, under the Treaty, about 1999;
the Government’s approach to the working of the stability pact and the convergence criteria;
the Government’s position on the future of ECOFIN and economic co-ordination in Europe;
any action that the Government proposes on economic convergence;
the action the Government proposes on ensuring greater flexibility in Europe to avoid any risks of potential shocks if there is a Monetary Union and progress it proposes to make the European economy more flexible and employment-friendly;
the Government’s determination not only to have a successful Presidency and proper and orderly decisions about EMU under the Treaty – the way in which the Government’s business advisory task force will help business and the City to prepare in or out;
the need for a period of stability.

The Government is determined not to fall into the old trap of saying that we will join “When the time is right” and implying, in so doing, we could join the next day or the next month, allowing that possibility to dominate every waking hour and week of the Government and then eventually being forced to make the decision for short-term reasons – not, as it should be and should always be, the long-term national economic interest.

I have said consistently that it is unlikely we will join the first wave – we have to ask questions about our levels of preparation, our flexibility and the economic cycle which has been out of line with our European partners – and that there are formidable obstacles throughout.

If we do not join in 1999, then Britain will need a period of stability without continuing speculation while Britain endeavours to meet the five economic tests.

At the heart of our policy will always be our determination to pursue policies of low inflation and to control public borrowing.

In every decision therefore this Government rejects short-term pressures and will not be diverted from the long-term national economic interest.

So this is the very best environment for the City to succeed.

So, thank you again for inviting me to join you this morning.

My congratulations to the Stock Exchange for leading this exciting development for the London Market.

The whole country’s best wishes to the investment houses and trading firms as they acclimatise to a new method of trading, one which I am sure is going to bring huge benefits to the City, the financial services sector and investors.

We all look forward to being back here at some point in the future to mark the next stage of the City of London’s continuing development and success.

Thank you very much.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, to the CBI Conference held in London on 10 November 1997.

I am grateful for the opportunity to address the CBI conference, to be able to thank you as business leaders of Britain for the contribution you and your companies make to the success of Britain at home and abroad, and to be able to agree with the CBI that to equip ourselves for the future, and to build the national economic purpose this country longs for, we need as our building blocks for prosperity:

• first, stability with low inflation;
• secondly, sustainable public finances;
• third, high levels of investment, fourth higher levels of skill and productivity; and
• fifth, not just open markets but a constructive engagement with Europe.

Now when I spoke to you last year we were agreed on the need for a credible framework for monetary stability for the long term.

Our decision on our first Tuesday of government to make the Bank of England independent, and to set in place a more open and accountable system of monetary decision-making, not only implemented one of the CBI’s own proposals, but it has in my view already given consistency confidence and credibility to monetary policy making.

I believe we are agreed it is right to take these decisions out of politics, and to free them from short term political pressures. Our aim, business’ aim: in place of stop go long- term stability.

When I spoke to you last year we were also agreed that responsible public finances are the cornerstone of stability. And our two year ceiling on public spending is not a one off measure but it is now part of a five year deficit reduction plan that will not only bring public borrowing down from an unacceptable 22 3/4 billion Pounds last year to 5 1/2 billion Pounds next year, but will also allow us to meet our priorities for education investment and health. Sustainable public finances: our aim, your aim, in place of taking risks with inflation, long-term fiscal stability.

When I spoke to you last year we were – all of us -agreed that rising levels of investment were the key to future prosperity. The 2 per cent cut in corporation tax to its lowest level ever, the reduction to 21 per cent of small business corporation tax, and the new investment incentives for small and medium sized companies not only reflect a Government that listened to the CBI’s proposals, but are the first stage in raising from too low levels, the quality and quantity of investment in the future of Britain. In place of short termism, a practical set of commitments to the long term and I pledged that in future Budgets we will do more.

At this point in every cycle in the past the British economy has been prone to inflation instability and to a return to stop go. My pre-Budget report later this month which will – I hope – be the start of a national debate about next year’s Budget will show that with disciplined action against inflation, with prudence and with responsible wage bargaining the British economy can be put back on track next year.

Last year when I spoke we were agreed too on the importance of that fourth building block for success; a highly skilled and adaptable workforce for the future. To encourage work incentives we have promised not to raise basic and top tax rates for the period of a Parliament, a policy I reaffirm today.

And this year we have begun the modernisation of the welfare state, rebuilding it around the work and learning ethics, and I am grateful to all the companies represented here today for signing up to what I have called a national crusade to solve, once and for all, our problems of youth and long-term unemployment. A fresh start for Britain.

Stability, investment, responsible public finances, skills and employment – four basic building blocks for long-term economic success. And when the battle is not British workers against British managers but both British managers and workers working together against aggressive competitors overseas nothing – neither out of date attitudes, nor backward looking dogma,

Neither vested interests nor restrictive practices – should stand in the way of Britain equipping ourselves for the challenges ahead.

There is a final building block- strong and lasting trading relationships with the world.

We are not only one of the most open economies in the world – trading 25 per cent of our GDP compared with America’s 10 per cent. But, in addition, nearly 60 percent of our exports are to mainland Europe and an astonishingly high level of international investment into Europe – 40 per cent of it – comes to the UK.

Let us be clear about the immediate challenges we face.

In less than fourteen months from now, a German business selling products to France or the Netherlands will be able to do so without exchange rate risk, with lower transaction costs and with more transparent prices, something that in itself will pose a big challenge to a British competitor hoping to supply the same order.

So EMU will lead to fiercer competition for trade and for future investment across Europe.

And the time to prepare is now long overdue.

Indeed Siemens and Daimler-Benz are among the first of what will be a long list of companies to use the euro for all their transactions with all suppliers, including those in the UK. Others can be expected to follow suit.

It is why two weeks ago Natwest corporate banking services announced they will train their staff to handle euro, and then last week announced a range of euro products and services will be available early next year.

That is why Marks & Spencer has decided to put in place the capability to accept euro in the UK.

The euro will radically transform the whole single market. So from now my message is: let’s get down together to the serious business of preparation.

For five years since Maastricht while other countries were making preparations our country refused to prepare.

But I believe it is now time in the national economic interest to set aside the divisions over Europe that have caused – over a long period of time – indecision, instability, a loss of influence abroad, and denied us a national economic consensus.

I do not dwell on the past to criticise but to show that Britain -and British companies- cannot make practical progress without clear and unequivocal answers on the critical European questions that face us and without preparation to meet the challenges ahead.

And these preparations on how we compete in a single currency Europe – of vital concern to each company in the country – are too important to leave to dogma or internal party politics, and too important to leave aside for years more of indecision and drift.

I am sure the British way is not to retreat into a shell or, in any way, to cut ourselves off, but to be true to our outward looking and internationalist traditions and take, as we have normally done, a pragmatic rather than a dogmatic view of our relationship with Europe.

That is why two weeks ago for the first time a British government made the position of Britain in Europe clear: that the vital test for a single currency was not one of dogma – but one of economics, Whether it is good for business, jobs and prosperity.

That is why we said that if a successful single currency can meet our economic tests, then Britain should join. In other words, that we were in principle in favour of joining a successful single currency.

And that is why we said , again for the first time for a British government, That while joining does involve a pooling of economic sovereignty – as in the single market – that if the economic benefits were proven then they should outweigh any constitutional bar.

If the Government recommended it, it would then be up to the people to decide in a referendum.

And for the first time again, a fortnight ago, the British Government also stated that it was committed to real preparations for the euro.

Britain, we said, needs a time of preparation before a time of decision, early in the next Parliament.

The strategy must be to prepare and then decide.

And I firmly believe that it is now possible to build a broad consensus – stretching across the country and in particular the world of business – a new consensus that sets the old arguments behind us.

To those who say that we need not answer the question of principle and that we can even postpone consideration without loss of influence for another 10 years, and who say that even if the economic arguments are compelling they would not necessarily want us to join and that we need not prepare, I reply:

– that it is practical common sense that the long period of indecision and loss of influence should be brought to an end;

– it is practical commonsense that, after almost 18 years of debate, we should be able to resolve the question of principle and agree that the economic benefits will mark the decisive test;

• it is practical common sense to say that if the economic case is compelling we should be prepared to join; and
• it is practical sense that when other countries have been preparing seriously for five years since 1992 we should begin real preparations now.

And these preparations should not only include creating the flexibility – the skills, the adaptability and the employability – necessary for a successful single currency, but also business preparations that enable us to be ready for every challenge ahead.

And I am determined that, even though making a decision this Parliament, to join EMU is not realistic, we will play our part in shaping it, so that, if we wish to, we can join a single currency early in the next Parliament:

• first by the practical and constructive role we will play at the centre of the creation of the euro in our UK presidency next year;
• second by preparing for membership of the European Central Bank as soon as we join the euro;
• and thirdly by leading the debate about the competitiveness of the European economy and especially, as we are doing in Luxembourg, about the flexibility needed to make the euro work. So I say to this conference today:
• as a matter of practical commonsense, let’s get down together to the serious business of preparation;
• let us together start building a national consensus stretching across the country about making this period of preparation work for Britain.

And let us agree that this period of preparation means that companies should first of all have the information to respond as others trade in euros.

Second companies need the information to trade and compete in euros themselves.

Third companies need to know what they have to do to compete when the single currency starts in 1999.

And fourth companies need to know what they will need to do if and when Britain decides to join the euro.

It is so as to be prepared that, before the summer break, the Government published a practical guide on EMU for business, and it is why we then we set up a Business Advisory Group comprising business, trade union, and consumers groups to look at the crucial practical questions.

The Group will report to me in December and I will publish their findings in the New Year.

But it is time to go further to ensure business has the necessary information on which to prepare and that government and business work well to iron out any possible problems.

I am delighted that Sir Colin Marshall will sit on the new standing committee which the Government is now setting up to oversee and to coordinate preparatory work across the economy, in public and private sectors.

And I am pleased that David Simon who has joined the Government from BP has agreed to be Minister responsible for the long-term planning work.

Together we will draw up an agenda for preparations, as we did for decimalisation, which sets out all the practical steps government and business will need to take before a final decision to join the single currency. And we will hold a series of conferences in the new year to ensure that all regions and sectors of the economy are aware of the need to prepare.

In providing information and guidance, and in removing obstacles to using the euro in the UK, we will draw on the experience and expertise of private sector firms at the vanguard of preparations and our partners in other European countries.

Let me just explain the scale of the task: from its introduction, businesses in the UK will be able to use the euro as they can the dollar today. From 1999 they will be able to:

• file company accounts in euro;
• issue shares in euro;
• have bank accounts in euro;
• pay taxes in euro;

But unlike the dollar or the dm today the British banking system will have the capability to process payments in euro domestically.

This should make it much easier and cheaper for banks to offer euro services to their UK customers.

And the Government will do as much as we can to facilitate the use of the euro in the UK from its introduction in 1999:

• the DTI will consult business on the possibility of amending the companies act to make it easier for British firms to issue shares in euro, and to convert existing shares into euro. And following the advisory groups advice – we will look at any other legislative steps the Government should take to make the euro easier for firms to use;
• we will work with banks to introduce an official “seal of approval” so that firms and individuals can identify which banks offer reliable information about the euro, and allow customers to bank in euro without paying high charges;
• we will work not only with the banks, but with accountancy firms, trade associations, and others to make sure their clients are getting the consistent and accurate information they need. We will make available to them treasury information and advice for inclusion in their company literature;
• and today, I have sent the top 1000 British firms an information pack “business preparations for the euro” containing the most up to date information we can offer. There are copies available for conference delegates here today.
• And in future we will publish six monthly reports for business on preparations.

And can I add also that during our Presidency we will apply for community funding for an information service, and we will produce packs for schools, just as we will make all our information available on-line through the links to libraries and information centres across the UK.

There is one further question we will address: how to put the euro bank notes and coins into circulation in Britain, if we wish to join a single currency – the timescale, the amount – the practical details.

So following the report of the Advisory Group we will also be publishing guidance for firms on changes they need to make to their computer systems.

The strategy I said was to prepare and then decide.

This is a Government that having declared for the principle will make sure that the preparations are made.

And I believe that with information, and preparation, the national consensus embracing people business and their government – the very consensus that has eluded us for years – is now possible as we plan for the future.

Just as business has a right to expect, we have moved from the ideological to the practical.

We have moved from talking about preparations to making them in practice.

We have set in motion preparations, by both government and business, that will allow the people to make a clear choice and a final decision.

We will work with you to promote the British national economic interest in Europe.

Work with you to ensure that British business is equipped for the challenges in the year ahead.

Work with you to be certain that Britain gets the best out of its position with Europe.

And to work with you to ensure that Britain, once again, can lead in Europe.

I believe that we have a unique opportunity – Government and business working together to make this happen.

So, from this conference, I make the promise that Government will do everything it can to create the conditions in which you can succeed.

And let me say by way of conclusion that our policies for stability, investment, education and employment -just like our policies for Europe- are designed to nurture those qualities that are best in Britain and British industry:

• our creativity and adaptability;
• our belief in hard work and in team work;
• our openness and outward looking traditions.

Qualities that made Britain great in the first industrial revolution, qualities we should call the British genius, qualities that we must encourage more resolutely today if we are to master the unprecedented challenges ahead.

Nothing should stand in the way of the practical task of equipping ourselves for the future, of making the next century a century of British prosperity, a Britain top of the league in Europe, and I believe here, from Birmingham, we can continue to work practically and constructively together so that this prosperity at home and in Europe is our achievement in the years ahead.

The speech made by Gordon Brown, the then Chancellor of the Exchequer, at the Centrepoint Annual General Meeting on 2 December 1997.

Let me say what a privilege it is to be at this annual general meeting, to be here to discuss with you some of the great social and economic challenges we face together in Britain today.

And I want to start by congratulating you, the staff and supporters of centrepoint, on this the twenty eighth anniversary of centrepoint – on all the work you do, the service you offer, the time and hours you give up and the dedication and commitment you show.

If ever there was a confirmation that community involvement and social commitment is alive and well and thriving in London and in Britain, it is the work of centrepoint and all its sister projects to combat not only homelessness, but hopelessness.

This year, tragically, centrepoint has lost a loved, respected and deeply committed patron – Diana, Princess of Wales.

And I want to assure you that the committee to commemorate and continue her work that we are setting in being today and the charity advisory group that will be announced later will have a membership that reflects her life and her work as the people’s Princess.

And our task will not only be to provide a lasting memorial to her work. It will also be to look at how, in very practical ways, we can help the work that she started continue and flourish.

And I want to assure you at centrepoint also of the support of thousands of people, of all political persuasions and none, right across the social and political spectrum for your work. And I want to pay tribute to your sponsors who through their generosity, enable you to improve the lives of so many of our young people – their continuing support is vital, and I would encourage others too, to make a difference by giving their support.

And in particular I want to congratulate you on the expansion of the work of entrepoint over the years

The scale of your work is now such that with centrepoint’s 500 bed spaces, you help 3000 young people a year, half of them from ethnic minorities, a third of them under eighteen, and nearly half who have slept rough.

the refuge for runaway children under sixteen;
the emergency direct access shelter for teenagers;
off the streets shelters for young rough sleepers;
the young women’s hostels, one helping pregnant women and children;
the intake house;
Baffy house;
Centrepoint kings cross;
streets ahead, the recruitment agency linking the homeless to employers;

And I would like to wish Centrepoint every success in running the admiralty arch winter shelter which will provide 60 bed spaces for young people.

From work to provide immediate relief and emergency help to tackling the multiple causes of homeless and poverty

And of course the network of foyers, starting in London, linking training to housing provision, now flourishing round the country – soon to provide 4,000 places, with a target of 16,000 by 2001-2002.

And I am delighted to meet again young people here today from Centrepoint Camberwell foyer some of which I met back in may .

You find unemployment homelessness and poverty an offence against standards of decency. So do I. And we must together tackle the problem

What people remember of the in the 1930s is unemployed men Standing on street corners.

What people identify with the eighties are youngsters begging and sleeping rough in our city streets.

If the 1980s are remembered for social exclusion I want the 90s to be remembered for inclusion – when individuals, the voluntary sector, and government worked together with shared purpose for a common endeavour.

Your aim is to tackle the causes of homelessness, worklessness and poverty, a blight on every community in the country and on a society that calls itself civilised .

Homelessness and poverty not only means deprivation and isolation, it means: hopes crushed, aspirations stifled, potential wasted, indignities and miseries visited upon the poor.

For 28 years you have been working as a voluntary group mobilising support.

I can tell you today that tackling homelessness and poverty is no longer solely the ambition of voluntary organisations like you.

It is now the ambition of the country’s government .

And your values – to support the vulnerable and build a society in which everyone has a contribution to make – are now the values shared by this government.

And let me say what that change means at a personal level.

For years as a labour opposition, I and my colleagues were angered by the injustices we saw, but we were powerless to take the action in government that we knew was needed.

Now we can take action and we recognise the responsibility that places upon us. But we will only achieve success if we work together.

So I want today to discuss with you how our economic approach in government ties in with the work you are doing, and to explain how the common theme of empowering individuals through providing opportunity lies not only at the heart of your approach to tackling homelessness, but our analysis of the economic challenge our country faces.

Of course our energies must ensure relief where there is suffering. But our ambition is not limited to bricks and mortar; it is to enable young men and women bridge the gap between what they are and what they have it in themselves to become. So we must
not only deal with the consequences of poverty, we must tackle its causes.

So I want to discuss with you how the government’s economic approach, for which I have responsibility, is aimed at tackling the root causes of homelessness and poverty in our country, and our shared task in doing so.

Let me start with what I believe is common ground.

Poverty diminishes not only an individual but the society which tolerates it. We are indeed our brothers and sisters keeper, and we must not walk by on the other side.

So we start from the recognition that everybody needs decent and affordable accommodation and that no young person should have to sleep rough in Britain. Something close to the heart of centrepoint’s aim it is to ensure that no young person is at risk because they do not have a safe place to stay.

that is why we have made a start with the phased release of capital receipts from council house sales: an additional 900 million pounds – over the next two years – which will increase the stock of housing for rent. And we encourage the foyer movement to seek assistance from local authorities which have access to more funds via the capital receipts initiative.

and we have refocused the rough sleepers initiative to provide 20 million pounds for 13 rough sleeper projects outside central London. With 1 million pounds of pump priming funding over the next 18 months to support new rough sleeping strategies in six other areas. And 8.1 million pounds in the spring, specially targeted at single homelessness, particularly amongst the young;

and we want to encourage more partnerships to help tackle homelessness and follow the example of crash – the construction industry group which encourages firms to provide materials for winter shelters provided through the rough sleepers initiative.

But this is not enough. Only by tackling the cause of homelessness and poverty – in unemployment, the lack of opportunity and skills for employment – can we build a better future for the long term.

So our anti-poverty strategy for this country, starts from the importance of providing opportunities for work.

Its founding principle is that we must tackle the causes of poverty, not simply deal with its consequences.

It is built around a new deal programme that offers new opportunities directly to young people.

It rests on rights and responsibilities going hand in hand – rights to work: responsibilities to work – rights and responsibilities of government and people together, so that together we tackle the problems we face.

So work is central to our anti-poverty strategy.

And last night, in downing street, I met teenagers from Newham to hear from them what they thought had to be done to improve prospects for young people. They said jobs.

The true scale of poverty, published in the last few days by the treasury, is a terrible indictment of the past and a call to action for the future. Despite an official rate of under 6 per cent unemployment 3 1/2 million households in Britain have no one in work.

And in Britain today there are nearly 400,000 young people out of work – where there really should be no young person wasting their talent, doing nothing.

And our strategy is built on recognising that poverty is caused from the workplace outwards – lack of job opportunities, inadequate skills, inadequate income to make proper provision for accidents, retirement and sickness. And the measures we propose include not just benefits reform, but tax changes, new learning and education measures and the introduction of a national minimum wage.

In this way a new anti-poverty strategy for Britain is now being implemented.

So what are our proposals?

First everyone in need of work should have the opportunity to work – young people, lone parents, and disabled men and women who want to work.

And for young people we are creating a new deal – four options:

a job with an employer;
work with a voluntary organisation;
work on the environmental task force;
and, for those without basic qualifications, full time education or training.

From January these options will be available in 12 pathfinder areas to young people who have been unemployed over six months. And from April, the programme will go nationwide – available in every community in Britain.

Our new deal recognises that some young people will require more intensive support to ensure that they are able to take up one of the four options on the programme and have a chance of benefiting fully from it.

And I am very glad that foyers, who are already doing excellent work with young people throughout the country, are bidding for provision of elements of the new deal gateway. And I would also like to encourage foyers to bid as providers for the education and training element of the new deal.

So we want to work in conjunction with Centrepoint, the foyers and other organisations to maximise the help given to our young people.

And I am very pleased that the Camberwell foyer has been closely involved in designing the gateway to the new deal programme in the Lambeth pathfinder area, and I expect them to be heavily involved in delivering the programme too.

So I believe it was right to tax the privatised utilities to raise the 5 billion pounds to help a generation of people – today excluded from the chance of prosperity – to have new opportunities.

And I am pleased that some of the country’s best known businesses are now agreeing to take part in the new deal project:

Allied Domecq, who have said they will offer at least a 1000 opportunities;

Tescos, who have guaranteed an interview for all new deal clients who apply to work in their new stores.

Ford, who have agreed to raise substantially the number of training places they provide for unskilled young people;

Nat West, who have agreed that their small business advisers will promote the new deal to employers.

And other companies are coming up with ways they can support the new deal – BAA, Radisson Hotel Group, Lloyds-TSB, Dixons, Marks and Spencer, Sainsbury’s, Unipart, Amersham International, Northern Foods, Grand Metropolitan, GEC, Rover, Jaguar, Peugeot, The Prudential, Tarmac – along with many others.

But I want to emphasise that the new deal is just the first part of this government’s mission to create a more just and fair society – starting with jobs and the chance to gain work skills – but continuing by modernising a welfare state that too often stifles talent and denies opportunities to men and women.

Our goal is not just to take people off the streets for a few months, but to make the unemployed fully employable and to rebuild the welfare state around the work ethic.

So second we must ensure work is worthwhile and it pays.

650,000 people in Britain face a poverty trap where the lion’s share of every extra pound earned goes in tax.

So there is no solution to poverty that does not involve a fundamental restructuring of the tax and benefit system.

That is why our pre-Budget statement proposed an integrated tax and benefit plan involving action at every level.

To maximise the rewards from work, a 10p starting rate of tax and a reform of benefit tapers will be introduced when it is prudent to do so.

To ensure that work pays for families with children, we propose a working families tax credit, backed up by affordable child care.

And to ensure the rewards of these reforms flow directly to the employee, we are committed to a statutory national minimum wage.

To improve rewards from work, to simplify administrative burdens on employers, and to encourage them to take on more people, we are considering the scope for bringing the national insurance structure for the low paid more closely into line with income tax.

And to ensure parents can work, our national childcare strategy.

But everyone who seeks to advance through employment and education must be able to make the most of their talents and potential. We will also create a new ladder of opportunity that will allow the many, by their own efforts, to benefit from opportunities once open only to a few.

The relationship between skills, employment and wages is clear – half the unemployed under 35 have no qualifications worth their name, 75 per cent of those unemployed for five years or more have no skills.

That is why we need to invest in our poorest communities with resources for education. It is why we put an emphasis on nursery education early on. It is why we want more young people to stay at school and more to go to college and university. It is why we place emphasis on lifelong learning with every employee entitled to an individual learning account and a university of industry which uses modern communications, satellite, cable and interactive technologies. To give educational opportunities to men and women in their homes and workplace.

That is why in the pre-budget report we also announced our skills initiative – pilot projects nationwide under which any employer who takes on and trains a young or long-term unemployed person and keeps them on, can now receive up-front three quarters of their new deal allocation thus giving immediate help with training costs – in the case of young people about 1700 pounds and for the long-term unemployed, 1500 pounds.

So we tackle homelessness, but we also tackle the causes of homelessness – and offer new opportunities in education, for jobs and for making work pay. Full employment is not, for us, a slogan; it is about providing employment opportunity for all.

It will take time to right the wrongs. But let me say: not only have we made a start by working together, but we will do more year on year.

But with 3 1/2 million households out of work, we do not deny the scale of the task we face, and the circumstances in which we came to power. I know more than anyone the cost the country has had to pay for 18 years of avoiding the problems, so I wont pretend solutions will be instant it will take time and none of our decisions will be easy.

We have had to and will continue to have to make hard decisions about where our resources are to go. Our priority is to put the money that we have available into new job training and child care opportunities for lone parents rather than just on benefit. While we could have given even more tax relief to those who have already accumulated considerable savings, our priority is to put some of the 1 1/2 billion pounds resources we are spending on encouraging savings to do more to help those who do not at the moment save – up to 6 million new savers. Our priority is to encourage more people to attend college and university by sharing the costs of higher education, rather than continue to limit higher education to an elite of the country’s young people. And our priority is to put money into the new deal for the young through the cash we raised from a windfall tax on the privatised utilities.

Difficult choices, but necessary choices. For we are starting out on a long journey with a route map and a clear destination – to make Britain a country where everyone, no matter their circumstances today, from wherever they come or whatever they have done, whoever they are – everyone has opportunity to make the most of their potential. That is my aim. And I believe that working together that can be our achievement: a new Britain where everyone has a contribution to make.