There are few more committed Euro-sceptics than Sir Alan Walters. But if his appearance at the Institution of Electrical Engineers’ annual dinner in London last month was meant to spark lively debate, it may have had the opposite effect.
As the 71-year-old economics professor and former economic adviser to Baroness Thatcher talked the audience through why he believes it will be madness to join a single currency, a rising hubbub of conversation grew from the back of the hall and spread dangerously close to the high table from which Sir Alan was delivering his speech. A liveried master of ceremonies stepped forward and delivered a sharp tap of the gavel in an attempt to restore order.
Sir Alan wound up his speech, making the most of the momentary silence: ‘The single currency is certainly the path to political union,’ he said. ‘You cannot avoid political union if you have a single currency. If monetary union goes through, Parliament will be no longer sovereign. Brussels rules. Think about it carefully, because there is no going back. That’s the nature of the European Union, and that’s the consequence of the single currency.’
Sir Alan should perhaps not have expected too favourable a reception in a hall packed with engineers, many of whom are working for pro-euro employers. Siemens, for example, was represented in force.
But, as Sir Alan explained to The Engineer after dinner, staying out of the euro should not be a problem for industry. The idea that a single currency is needed to make the single market work is ‘absolute unmitigated rubbish’. Firms can simply treat the euro like any other foreign currency, and continue to do business with other European partners.
‘I can see UK industry saying there is zero currency risk from the euro, just by hedging,’ he says.
Sir Alan is not only a Euro-sceptic over currency, he is also sceptical about Britain’s membership of the European Union. ‘I voted for the Common Market in 1972,’ he says. ‘It showed deplorable short-sightedness.’
Last May he stood as a Referendum Party candidate for the City and Westminster. He polled 1,161 votes. But despite the Labour landslide, he has returned to the UK after spending the past 20 years in America.
‘I would never would have come back to England if there had been a Michael Foot-type leading the Labour Party.’
He thinks Labour is doing the right thing. ‘Some of their individual methods are awful like windfall tax. But Brown has shown the ability to shoot from the hip, and overall they are on the right lines and I am speaking as a confirmed Thatcherite.’
But if Sir Alan admires Labour, it is because he thinks it is Thatcherite. ‘Tony Blair has modelled himself on Margaret Thatcher,’ he claims. ‘Blair admits that Thatcher’s policies are basically the right ones.’
Many economic problems facing industry look unlikely to abate. ‘I think the interest rate is too high,’ he says. ‘They should have raised it to 7% earlier, instead of making these tiny incremental changes which have little immediate effect. They’ve overdone it. It takes two to two-and-a-half years for the interest rate to affect the economy. That means the current high rates will affect us in 2000.’
With the economic fall-out of high rates to come, the pain of the high value of the pound looks unlikely to go away either, according to Sir Alan.
‘The current level of the pound-deutschmark is realistic. And if Britain were to join the euro, it is unlikely the French would agree to the UK going in at much below DM2.90. And if we stay out, we will still have an enormous inflow of capital into the UK because of flight from other currencies.’
Some industrialists have argued that the chancellor raise taxes at the next Budget to try to damp spending. Sir Alan is sceptical.
‘Taxation is a very unreliable tool. We know how the interest rate works, but tax is unpredictable. The priority of the Government must be to cut spending. But there is no easy way out through fiscal policy.’
Sir Alan has the luxury of being able to watch the Government grapple with the economy from the sidelines. He is now vice-chairman at US insurance and financial services group AIG.
Only one thing would persuade him to rejoin the political fray. ‘If Margaret Thatcher was leader again, I’d be back in 10 minutes flat,’ he says.