SPEECH MADE BY

It’s a great pleasure and, indeed, a privilege to be here. I have been to several of these meetings and I have been impressed by the enthusiasm and the honesty with which this subject is being addressed.

My very brief credentials as far as the Liberal Party is concerned is that I fought five elections altogether up to 1983. I was Chairman of the Party between 1979 and 1982 and I was very much involved in the amalgamation of the Liberal Party with the Social Democrats. That does not mean to say I was ever a Social Democrat, but I could see the way that the political wind was blowing and on the whole I feel that the decision was the right one and has been beneficial for British politics. I should also assure you that my standing here today, and having been kindly described as "still a senior Liberal", does not indicate that the Liberal Democrats as a whole have had some great road-to-Damascus experience. Equally, I would assure you that there is more than just one allegedly senior Liberal Democrat who takes a sceptical view especially of the euro.

Sir Oliver Wright asked me what I felt about the general disposition of Liberal Democrat supporters throughout the country. I suspect it is not very much different from the balance of the other parties – except, maybe, that Liberals are more given to hope. So the Liberal Democrats with their natural enthusiasm for internationalism and for peace are much more hopeful that within Europe we shall get everything changed and revised according to our view of things. Meanwhile others take a more pessimistic – or should one say more realistic – view.

But I do emphasise my respect for the euro enthusiasts in my party who are, as I have said, internationalists and have very much been influenced by the great towering Europeans who appeared after the war to rebuild a decent democratic Europe. They tended to be Liberal, but also tended to adopt the generally French-influenced bureaucratic model for Government. I think also there is possibly amongst Liberal Democrats more of a disinclination to be very pro-British than there might be amongst your average Conservative and even your new Labour. And that is a strange phenomenon because Liberals can be very pro-Scottish if they are Scots, and very pro-Welsh if they are Welsh, and wildly Irish if they are Irish, but we do not quite so easily come to terms with being British.

This does not greatly matter, except when it comes to questions of whether Britain is in any way unique, whether it is right to consider itself as having a unique contribution to make or whether this is a fantasy which we still enjoy but in the course of time will disappear. I must say I tend to the old fashioned view that by our history, by our extraordinary mixture of origins, by the power of our language, by our place geographically in the world, by the fact that we represent one-hundredth of the population of the world with only one thousandth of the land mass, we are unique. I think that we have made a remarkable contribution to the advancement of mankind and that, indeed, if one looks at the twentieth century, the whole outcome of it would be very different had not the Anglo-Saxons and the Anglo-American alliance played the part it played.

I also tend to the view that people interested in politics have two general approaches. One is the belief in fixing things: in trading terms these people would be protectionist and in legal terms they would want everything written down and enshrined forever. And the other approach is to be more fluid, to take a more pragmatic view, which has been the general British tendency since we carved ourselves up so badly in the seventeenth century that we learnt the lesson and ever since then we have tended to more moderate and more pragmatic ways. So that whereas in France and Germany they have had great leaders who have had ambitions and plans for a thousand years and so on – we won’t go into great details – in Britain five years is quite a long time and we have tended to take things as they come. I think even as individuals some of us want to know exactly what is going to happen in the future, if we are going somewhere we want to know what is the programme, what is going to happen, who is going to say what, what have I got to say? And others of us take a more genial, liberal view and are confident that something will come to mind, we shall deal with things as they arise in a decent and honourable manner and we will let life turn out as it will. This is the sort of events-driven attitude. You may remember that there was one famous Prime Minister who when asked what were the main problems in politics, said, "Events, dear boy, events".

Of course one can only admire those great political figures who have had massive changes of view in their lifetime and any reasonable man should be ready to change his view when presented with a convincingly better one. One thinks of Gladstone, one thinks of Churchill and one thinks of some of the very greatest men who at some point in their life have come to embrace a new idea and have changed course. Equally, one is suspicious of those who simply blow with the wind. If one looks at a legendary example, Canute is famous (as even our Danish and Scandinavian friends may remember) but in fact he is famous for the wrong reason. He is remembered in this country because he is alleged to have thought he could stem the tide. In fact he was not trying to demonstrate that at all. He was trying to show that you cannot stem the tide, that the tide will come in and go out and you will be washed away if you are not careful.

That sort of lesson has to be learnt by a nation every few hundred years. One of the recent examples of that for the British was when Singapore fell with the guns pointed out to sea because no-one had envisaged that there might be an attack from the land. And so, as you know, there was a terrible situation with every gun pointing out to sea, the Japanese coming through Malaya and Singapore and all its defences collapsing.

n a more recent political context there was a similar situation in September 1992 when the pound was getting shakier and shakier in the old ERM but both the Prime Minister and the Chancellor of the Exchequer at the time said that it would be defended at its level within the system "over their dead bodies". Their dead bodies were not cold by the time, within 36 hours and even after putting up interest rates to 15%, we were driven out of the system and we had one of those timely reminders that one cannot forever stand up against natural forces whether economic or otherwise.

And of course from that moment in September 1992 we have had two strange phenomena. One is the loss of reputation of the Conservative Party, which still remains unrecovered, because whatever people thought about the Conservative Party they were regarded as good managers of money. If they did not know about anything else they did know about money. And that was undoubtedly – and I think even my Tory friends here will acknowledge – a setback which is going to take a very long time to recover. It also had the strange effect, once we had overcome the short term loss, of ushering in a period of almost unprecedented economic advance and prosperity. And so in due course Mr Gordon Brown inherited the most benign set of economic circumstances which has existed in this country since the second world war, with inflation low and under control, with interest rates at a very modest level, and with unemployment headed downwards. And all that was because, having taken the terrible pain, though not according to our own will, of being expelled from the ERM in September 1992, we have subsequently lived with a flexible currency. If you look at the graphs it has moved quite significantly against the dollar, and against the euro currencies over that period, without terrible consequences for us and we have enjoyed a period of exceptional prosperity.

There is a view that a nation is like a great ship of state. I do not actually hold that view. I think a nation is much more like a flotilla of a million fortunes which the government can only endeavour to keep together. We are used to such statements as "the nation last month had a balance of payments deficit or surplus" and in fact it is all about individuals trading with each other and the extent to which the nation is involved is rather like Mother Duck trying to keep the ducklings from being swallowed by a heron. This again I think argues for flexibility, for the government to use very limited means to interfere with the trade and activities and enterprise of its people.

As we know, there are two devices which the government has to endeavour to keep the economy in good order, and really only two. Those are taxation, which is unpopular, or interest rates, which can affect the balance of the currency and affect the level of economic activity and remain a vital key in economic management.

And really the strongest issue in my mind, the strongest reason for arguing for the retention of the pound, is that it means that within our own nation, within our own government, we retain control of our own interest rates. If you do not have a separate currency you cannot have separate interest rates at a national level. We are mocked, sometimes, as eurosceptics, for being "Little Englanders" and for wanting to preserve the Queen’s head on the currency (which is not an insignificant matter) but the real issue is whether the currency as a whole is still managed 100% in the interests of the British nation or whether it is going to be managed as a conglomerate in the interest of a growing number of nations, whether or not it suits us. I would say that we are a sufficiently large unit in the economy of the world and that we are sufficiently unique in the way in which our trade is balanced between Europe and America and the rest of the world, to need and merit having a currency and an interest rate system of our own. To abandon that would be to leave ourselves at the mercy of other forces which would not be so concerned with our prosperity, quite apart from the fundamental loss of national sovereignty involved.

I recall how shortly after the debacle of 1992 I happened to be in conversation with the then Mrs Thatcher, and I asked her what she would have done when the Germans raised their interest rates to 8% to accommodate unification. She said that she would have demanded an immediate crisis meeting and an immediate realignment of the currencies. From a two dimensional point of view a pound at 6% and a pound at 8% appears to be exactly the same thing, but anyone with any knowledge of money, anyone with a three dimensional point of view, will realise that a pound or a deutschmark at 8% or pound or a deutschmark at 6% are very different things. We had gone into that system before the reunification when deutschmark rates were low, and although it could be argued that we went in rather high, it was obvious once the deutschmark rates had gone up that there needed to be a fundamental revision. And of course when the fluid become fixed they tend not just to become fixed, they tend to turn to ice, and so we took no measures at all. Reminiscent of that earlier occasion when the price of oil trebled and we were assured that the value of the pound in our pockets was the same. Once more, two dimensional thinking was disastrous for the country.

And so, as I have said, that I think is the core of the issue. There are other points which I will touch upon but that is the fundamental issue. Should this country retain the ultimate control of its own interest rates or not? Does it need to or not? And I could use a simile that a carthorse and a racehorse might very happily inhabit the same field but yoke them together and you have trouble. Likewise the horses of Europe might well feed and gambol about in the same large field, but try to tie them all together and you are going to have trouble. We have had a period of relative calm on the economic front but give the present system ten, twenty or thirty years and it will run into severe strains from which we can escape by remaining genuinely flexible.

There were other things with which the pro-euros tried to chill our blood four or five years ago. We were told that if we did not join the euro the City of London would go into catastrophic decline, that all the markets would leave and we would become an offshore nonentity. If you examine the facts it is the very opposite. The amount of dealing in the euro currency and the other currencies of the world and in all the instruments of the financial markets continues to rise. There is of course a battle of competition with some bruising experiences recently but we are still amongst the leaders in the world and there is every sign that that will remain the case. Again, the two dimensional thinker who might say that since we have got very little copper mining in the United Kingdom and not too many commodities, commodity markets are going to disappear. Of course they don’t. London remains one of the great markets of the world.

Another persistent assertion is that unless we join the euro we will cease to receive the inflow of overseas investment and they even manage to persuade distinguished Japanese gentlemen from time to time to join the chorus and we are told that jobs will be lost and disaster is around the corner. But if anyone has read the papers this week they will see that once more we have received 40% of incoming investment from outside the European union despite the level of sterling. By comparison with other European nations we are still taking the `lion’s share.

So I would say to you that these arguments for a massively expensive and dangerous change do not exist. We have a currency of our own, and the Bank of England, under a certain amount of supervision no doubt, looks after the interest rates according to a formula which is working very well. Why not leave it alone and let us prosper? Does it mean to say that we will be expelled from Europe? Not at all. There is no such evidence and I think that as Europe expands there is going to be a need for many of the incoming countries to retain their own currencies and the concomitant flexibility. Certainly if we try to bind them all together it will be a disaster.

And so upon these three points, that overseas investment has remained high, that London remains strong and quite able to cope with the markets and all these financial instruments, and above all that we have had a period of continuing prosperity with our flexible currency, I rest my case for retaining the pound.

There is, of course, the recurrent discussion about convergence. Convergence is a strange concept because it imagines that just because you are, as it were, passing in the night you are going to merge at that particular point. The very fact that the rate is ‘right’ on one day implies that it is almost certainly going to be wrong on another day. The very nature of these rates are that they move and a sensible system of currencies enables that to happen.

I have not touched much upon the issues of democracy because that is the subject of further discussion and the next speaker. But I would just say that one of the powerful arguments which has arisen in Liberal Democratic circles comes from Lord Dahrendorf’s assertion that there can be no real or effective democracy beyond the nation state. Democracy depends upon the existence of a demos – a body of people who at least share the same language; can be part of he same big conversation; listen to the same news, whether it comes via the Sun or the times, Radio 1 or Radio 4. Without such common influences and activities, how can a people be expected to determine the colour of their future government in the interests of themselves as a whole as well as individually. This is a tremendous issue which should be set up against all those who are quite prepared to sweep the issue of the concern for democracy under the carpet in the interest of promoting the great European bureaucracy.

Democracy matters but we can see how it can be allowed to shrivel when democratic traditions are inconvenient to wider plans. Instead we are tempted to accept a benign bureaucracy which looks after us all to some extent or another. But if democracy becomes no more than a sham we may see the re-emergence of forces, dark and dangerous forces, which would cast aside the democracy and peace we have. Democracy needs to be nurtured and advanced. It cannot be satisfied by a slip of paper being put in a box every four years. Nor can real and effective democracy be exercised by or entrusted to representative delegations meeting to determine the fate of an entire continent. The life blood of democracy is provided by people who love their country and have some understanding of its history and its culture and have a deep concern for its future. I do not believe that the democracy of a great nation, such as ours, proud of its past, confident of its future, is other than a great benefit to mankind.