As we enter the Houses of Parliament on our way to interview John Redwood MP it is ironic that the first politician we spot is none other than John Major. It was Major who once denounced his then-Welsh secretary of state as a “bastard” because of Redwood’s euro-sceptic stance – and it was that same “bastard” who challenged John Major for the leadership of the Tory party.
We declined the opportunity to ask Major for some advice – but were a little surprised by the almost total lack of political trophies in Redwood’s large Commons office. The only one of note – tucked away at the top of a set of bookshelves – was a framed copy of the front page of the Scottish edition of The Sun carrying a story in which Redwood had made Chancellor Gordon Brown look like a chump by making him admit in a parliamentary debate that he didn’t know what the cost of a litre of petrol was.
“Poor Gordon hadn’t got a clue,” Redwood chuckles. “These people are totally out of touch and they don’t know what damage they are doing.”
Redwood, on the other hand, claims to be very much in touch with the electorate. He is, in fact, quite confident that the British people do not want the single European currency and will vote against it in the general election – “or, if not, by a referendum”: a rare hint from a politician that his party might not actually beat Labour at the polls. “I trust the electorate and I respect their right to choose. All the evidence says that were we to have a referendum today that our side would win it quite comfortably.”
In fact, so confident is Redwood that he has some advice for Financial Director readers: “Businesses shouldn’t be wasting time on the euro – spending time preparing for it. They know from the opinion polls that the majority of their British customers don’t want the euro, the majority of their shareholders don’t want the euro.”
He may be right about the electorate, but businesses are seemingly more swayed by the euro’s advantages (though by no means overwhelmingly so).
Redwood is quick to note: “The issue will be settled by the British people, not by British business. And I speak as someone who is a businessman as well as a politician. When I have got my business hat on I do not go around saying ‘Save the Pound!’ It would not be the right thing to do.”
There is much more to Redwood’s argument, however, than simply the fact that “most” of Britain isn’t in favour of the euro. “It is very easy to make a business and economic case against the euro because it would be very bad for many British businesses,” he insists. “We know that it would entail enormous cost. The cost of transition is now estimated to be #30,000m.
There is no obvious benefit that would result from that expenditure – absolutely no benefits if you trade mostly outside of Euroland and only a few net benefits if you trade within.”
But we note that a number of major companies are sabre-rattling about Britain’s continuing non-membership of EMU, threatening either to pull out of the UK or to redirect future inward investment to the continent.
“A few are and I think they are wrong to do so,” Redwood says. “They are alienating many of their British customers. Not many have British shareholders, but if they do, they are alienating them, too.”
Download our Whitepapers
Unilever seems to be a particular bugbear. “It is an Anglo-Dutch business,” he says. “It is led by an Irishman (chairman Niall FitzGerald) who likes the idea of the euro for his own country. He is therefore energetically arguing for it in Britain. I think he is very out of touch with many of his fellow directors, employees and shareholders in the British end of the business.” He adds that, unlike some foreign-owned multinationals, “entrepreneurial, fast growing, British-based independent businesses” are not campaigning for the euro.
Redwood – ever unconventional – challenges the accepted wisdom that the euro at least brings benefits in terms of reducing currency risk. Most multinationals in Britain of course also trade a lot with the US and Asia.
“If you look at the track record of the euro over the last two-and-a-half years, compared with the track record of the pound, then you will see there has been much more currency risk in the euro compared with the yen and the dollar than there has in the case of sterling,” he insists. “You would have had more expensive currency risk for our trading pattern than we have had by staying with the pound.”
Moreover, he says that money transmission costs have gone up in Euroland, offsetting the reduced cost of hedging currency exposure. “The banks are doing that because they have to make money somehow: if they are losing foreign exchange charges they will put it on the money transmission charge,” he says. “The European Commission is very worried about this, as well it might be.”
Redwood claims that it is “difficult enough to have a single economic policy that makes sense for the whole of Britain”, let alone having a single interest rate “that is right for Leipzig and London”. We challenge this: what about New York and New Mexico? “You could argue that it would be economically more efficient to have three or four currencies in a land area as big as the USA – and in a way that was what the Civil War was about: whether you needed more than one governing system. It works reasonably well in the US because they all volunteered to go to a new country and the only people who didn’t want to live in it were killed – like the Indians.”
In any event, labour mobility is aided by the fact that the US has a common language. “This cannot happen in Euroland because we all speak different languages. There is not that labour mobility and there is not the acceptance that we all want to be governed as one people.”
Redwood has just published a book called Stars and Strife: The coming conflicts between the USA and the European Union – Winston Churchill merits almost a dozen mentions in the index. He argues that Churchill wrote his History of the English Speaking Peoples “to show how much they’d been through and how much they have in common”. He says: “I go to town on this issue because my opponents falsely claim that Churchill was in favour of European union for Britain, whereas Churchill was only in favour of European union for France and Germany – but very clearly didn’t want Britain to be part of it.”
We suggest that perhaps Redwood’s stance might be spun by euro-protagonists as Little Englander, isolationist, xenophobic. “Yes, I imagine it will be spun that way, because the other side have no real arguments of their own,” he insists.
“People should also ask themselves about the constitutional issues,” he says. “Mr Blair has come up with his extraordinary statement that, yes there are important constitutional issues, but that he has reconciled them all in his mind and it’s all fine.
But I and my colleagues would like to tempt Mr Blair into a debate over the issues. We never get any answers from government so I would urge your readers to recognise that there is something much bigger here than the exchange rate and the margin on selling margarine across the EU. We are talking here about how we are governed.”