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Portillo: Blair should publish cost of scrapping the pound

Speaking at a press conference at Conservative Central Office, Rt Hon Michael Portillo, Shadow Chancellor:

"Mr Blair has been unwilling put any argument for the euro. He says there are constitutional issues associated with scrapping the pound, but that these have been 'resolved'. He has not said why he thinks they have been 'resolved'. Indeed, he refuses to say even what he thinks these constitutional issues are.

Mr Blair says it would be 'patriotic' to scrap the pound. But many will question whether it is patriotic to impose on our economy a single European interest rate that would nearly always be wrong for Britain. Britain's membership of the ERM highlighted the risks of setting interest rates not in the interests of our domestic economy, but with reference to other parts of Europe. Labour is desperate to repeat the experience.

Tony Blair may not have set out any argument for the euro, but he has made it very clear that if Labour were to win on June 7th he would start abolishing the pound on June 8th. He must now say how much abolishing the pound and converting to the euro would cost.


Many times, Labour has been asked to publish its estimate of the cost of changing over to the euro. Many times, Labour has refused. As Gordon Brown says, 'the Changeover Plans do not offer any estimates of cost'. It is astonishing that Labour is pressing ahead with its plans to scrap the pound while giving no indication of how many billions of pounds this would cost the British economy.

We can only conclude that Labour's policy is to scrap the pound at any cost. The Labour-dominated Trade and Industry Select Committee said in November: 'There has been growing discussion over the past two years of the costs to the UK were it to enter a single currency. This is a discussion in which the Government has been unwilling to join'. Taxpayers and businesses have a right to know how much scrapping the Pound will cost them. So Tony Blair must join that discussion and he must do so before polling day.

Whilst Labour has been silent on the issue, others have not. The accountants Chantrey Vellacott DFK say the cost could be as high as £36 billion. That is a sum that dwarfs the differences between the parties over tax and Government spending. If Chantrey Vellacott are right, scrapping the pound would cost twenty times as much as decimalisation - after adjusting for inflation. £36 billion works out at £55 million for every constituency, £1,500 for every household in the United Kingdom.

Most of the cost would be borne by businesses. All businesses would have to change their accounting systems and their tills, whether or not they trade with countries inside the eurozone. A survey of large companies by KPMG suggested that, if Britain were to join the euro, the cost of altering computer systems would be five times the cost of coping with the Millennium Bug.


The British Retail Consortium say the cost to their sector of converting to the euro would be between £1.7 billion and £3.5 billion. That means customers would have to pay more for their goods for the privilege of paying for them in euros.

Chantrey Vellacott estimates that the cost to the public sector would be in excess of £3 billion. Already, local authorities and NHS bodies have had to appoint 'euro coordinators'. We don't know how much money Whitehall Departments have set aside for converting to the euro, but - given Labour's determination to take Britain in and to do so quickly - we expect these sums to be substantial.

Conservatives have different priorities. Because we will keep the pound, we do not have to spend billions of pounds on scrapping the pound. Instead, we want to use this money to help charities by reducing the amount of tax they have to pay. So we will use the money Tony Blair has set aside to scrap the pound progressively to abolish charities' irrecoverable VAT liabilities.

Charities lose significant amounts of money because they are not able to recover the VAT they have paid - unlike local authorities and businesses who can. Barnardos alone lose £1 million a year as a result of their irrecoverable VAT bill. This is money that we would refund to charities so they can use it towards their important work rather than giving it to the Government.

Labour has not said whether it thinks £36 billion is too large or too small an estimate of the cost of scrapping the pound. If Labour disputes these figures, it should publish its own estimate of the public and private sector cost of scrapping the Pound.

The Prime Minister likes to question us about how we will pay for our tax and spending plans. We have shown in precise detail how we will do this. It is now up to Mr Blair to say how much his plan to scrap the pound will cost. That way, businesses and taxpayers can know before polling day just how much they have to lose.

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