Comment: Why a UK referendum is unlikelyTony Blair has promised that a decision on any possible euro referendum will be made by mid-2003. Blair has now missed the opportunity to hold a successful referendum. The lengthy honeymoon that he enjoyed when he won the UK general election in 1997 has now passed. Blair looks tired and his government looks bedraggled. Massive opinion poll leads of up to 20 points have now all but been wiped out and the Labour Party is now hardly ahead of the Conservative Party opposition. The government has given presentation of policy, or 'spin' as it is known in the UK, much greater priority compared with delivery of services. Blair has included too many second-rate individuals into the cabinet. One, a college lecturer called Stephen Byers, 'resigned' in 2002 after repeatedly being caught out lying to journalists and to parliament. An assistant in his department had even recommended on 11th September 2001 that bad news should be published on that day so that it would be 'buried'. And more importantly, the UK economy, after performing well for a decade, has entered a downturn that will last for several years. The stockmarket has fallen heavily and growth has now evaporated. The housing market has experienced a period of massive price rises which will now be reversed, bringing misery to those buying at the market peak. The pound has been overvalued for so long that the UK now has a massive balance of payments deficit which is likely to cause the value of the pound to decline heavily in the future. The UK treasury minister, Gordon Brown, has promised a massive growth in public spending over the next three years which will not be financed by tax revenues from a stagnant UK economy. He will either have to repeatedly increase taxes or start to borrow money to finance these promises. This will again put downward pressure both on the economy and on the currency. Regulations and red-tape on business had been restrained until a few years ago. The Labour government has imposed a massive range of new regulations on business discouraging new investment in the UK. The economies in the euro-zone are also performing poorly despite the low level of the euro in exchange markets. Growth rates are low or non-existent. The EU has imposed constraints on government borrowing under the so-called stability and growth pact. Government debt must be below 60% of GDP and budget deficits must be below 3% of GDP. Countries like Germany are now heading for these limits. German government borrowing is at 2.7% of GDP. Euro-zone governments will either have to slash spending or look for ruses to avoid the constraints. As this economic background becomes more self-evident to UK voters, the popularity of the Labour government will continue to decline. Tony Blair would be unlikely to risk calling a referendum in these circumstances as the resulting no-vote would terminally damage his credibility. Moreover, Gordon Brown has said that he personally would clear the way for such a referendum by deciding whether the UK had passed five arbitrary 'tests'. As his credibility would also be fatally damaged by a no-vote, along with his chances of succeeding Blair as prime minister, he is also unlikely to agree to a referendum. Rupert Murdoch, the proprietor of several influential UK newspapers, has also said that he would instruct his papers to campaign against euro entry if a referendum were called. So, although the guessing will continue for the next several months, a UK referendum on the euro is unlikely to be called. |