- The Observer,
- Sunday June 8, 2003
House prices would go up, at first, as British base rates were slashed to euro levels. Base rates in Europe are 2 per cent, nearly half of the Bank of England rate. But Britain's housing market, long prone to boom-and-bust, could become even more volatile when the ability to vary rates is lost to Frankfurt. Europe also has a stronger tradition of fixed rate mortgages, which have proved unpopular in the UK. Longer term, measures to encourage take-up of fixed-rate mortgages will be good for British homeowners, regardless of euro entry.
Your holidays
Changing money would become a thing of the past for the 16 million Britons who holiday in the eurozone. Around £128 million is spent in commissions for holiday money. Use of British cards in foreign cash machines is expensive. The 'cash handling charge' and 'foreign exchange loading', for withdrawing £500 abroad is more than £21. These would go.
But this summer tourists will notice a more expensive Europe following the recent surge in the euro. By fixing the pound against the euro at the current 'fair value', British holidaymakers will be guaranteed against a further slump in the value of their money.
Your services
Europe generally leads Britain in the quality of its healthcare, schools and trains. But strict European rules on budget deficits - the Stability Pact - could scupper Gordon Brown's plans to match European standards by forcing the Treasury to cut back on borrowing. However most of Europe thinks the pact has outlived its usefulness. Leading politicians in France and Germany are lobbying for a version of the existing British system, a move which would be aided by British euro entry.
Your shopping
Cars, TVs, DVDs, and computer games consoles have long been at least 10 per cent cheaper in Europe. Membership of the single currency improves transparency of these mass-market products, and should push prices lower for internationally traded products. The huge taxes that are paid on purchases of tobacco, alcohol and petrol would also become more transparent.
This effect would not stretch to services such as hairdressing or a restaurant meal. And the experience of the euro changeover shows that there are many retailers who take advantage of the confusion to hike prices. In the longer term, however, the euro should help bring British prices down.
Your job
Britain has kept unemployment at around 5 per cent as it creeps back up in Germany and France. Total eurozone unemployment is 8.7 per cent, compared with 10.2 per cent at the creation of the euro in 1999, but much higher than Britain. In the past five years Britain has created one extra job for every 80 people in the population, but the Eurozone has created two.
Crucially Britain is regarded by foreign investors as a 'pre-in' - a likely future entrant to the euro. If Brown rules out entry for the foreseeable future, that status would change. On Friday, for example, Ford said that euro entry was essential for its future investments in Britain.
