Geoffrey Howe: Mr Blair must not repeat the errors of Mrs Thatcher

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Eric Garcia

Washington Bureau Chief

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Do prime ministers learn enough from their predecessors' mistakes? As Tony Blair grapples with Gordon Brown's five tests for euro membership, there are five clear lessons that he should learn from Margaret Thatcher's experience.

The first, and most important, is that no government can prosper in face of a serious and continuing clash of views between the prime minister and one of his topmost colleagues – least of all, perhaps, the chancellor of the exchequer.

The persistence of such fundamental discord at the heart of government must, sooner or later, destroy the essential core of mutual trust. That is what happened – consecutively and, in the end, disastrously – between Margaret Thatcher and Nigel Lawson and myself. Not just one but two of those who served her as Chancellor of the Exchequer felt obliged to quit, effectively because of continuing disagreement about the European monetary system.

The irony is that in the Blair-Brown relationship, no such difference of principle is meant to exist. On the contrary, Mr Brown long ago proclaimed: "In principle, British membership of a successful currency offers us obvious benefits – in terms of trade, transparency, costs and currency stability." Yet the two men have so mismanaged each other as to convey the opposite impression. Mr Blair's first mistake has been his failure to resolve that conflict.

His second mistake – another echo of the Thatcher era – has been to conduct business as though the problem will somehow resolve itself, when (as we used to say) "the time is ripe''. Neither Thatcher nor Blair has ever appeared to recognise that we ourselves needed to take action to hasten the fulfilment of the "ripeness'' or (in today's jargon) "convergence'' condition. Each has behaved as though the process can be expected to mature through some kind of political virgin birth.

The third mistake has been to cloak the problem in a set of apparently objective tests – the answer to which may, however, largely depend upon the performance of somebody else. The 1990 equivalent of today's five questions was the fulfilment of the so-called "Madrid conditions'', requiring liberalisation in the rest of Europe. This time we are looking for "clear and unambiguous'' answers to questions that can be spun in much the same way. But how often has any chancellor ever enjoyed the luxury of "clarity and unambiguity'' in answer to any of the questions that crowd his desk?

Gordon Brown certainly didn't when he decided to surrender control of interest rates to the Monetary Policy Committee. No more did I, when I took the decision to abolish the 40-year-old system of exchange controls. Yet in each case the decision was unambiguously right – and required courage as much as prudence. "On your own head be it, Geoffrey,'' said the Prime Minister on the eve of my announcing that decision.

The fourth probable mistake is to miss the right moment for taking the decision. It is clear, in retrospect, that 1985 was the year in which Britain should have joined the European monetary system. The resultant restraint in monetary policy would have steered us away from the so-called "Lawson Boom''. We should have been able to play a much fuller part in shaping our economic future – for example, in managing the Europe-wide response to the shock of German unification. And we should have avoided the later mistake of joining the European monetary system for the wrong reasons and at the wrong rate.

Tony Blair's re-enactment of our fifth mistake is his continuing reluctance to argue the political and economic case for joining the Euro Zone. Aneurin Bevan once asked: "Why read the crystal when you can read the book?'' Too many eyes today remain focussed on Gordon Brown's crystal ball. Yet in the real world, every day sees solid, fresh evidence being added to the book – in the form of warnings from key industrial investors. For example, Sir Nick Scheele, the president and CEO of Ford, spoke for them all when he warned recently that "being outside the euro presents a growing threat to our ability to function from a British base''. And so say Peugeot, Toyota, Unilever, Siemens – and many others.

The Japanese Prime Minister Toshiki Kaifu told me that "Japan regards her relations with Britain as the keystone of her relationship with Europe''. Years later few, if any, overseas observers would easily make the same comment.

It can be no surprise if far too many Britons now also incline towards a similarly negative view. Yet the opinion polls still show that a crucial one-third of public opinion is ready to be persuaded of the merits of the case for joining the euro – and thus tipping the balance firmly in its favour. But this will not happen unless and until the Prime Minister at last finds the courage to argue vigorously the case for his own convictions.

If Tony Blair is to give up repeating our mistakes, then the time has come for him to fix a date for euro membership, to start preparing for that conclusion now and, above all, to start persuading the British people that he is right.

Decide, prepare, persuade: that should be his agenda from now on.

The author was Chancellor of the Exchequer and Foreign Secretary under Margaret Thatcher