Letter: Keeping the benefits of hard money

Professor Douglas Wood
Friday 02 October 1992 18:02 EDT
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Sir: The undignified but predictable collapse of John Major's hard currency claims for sterling consign us to second division status in Europe (provided we don't get banned altogether for arguing with the referee).

But the low interest, discipline and transparency benefits of a hard currency can be retained. UK domiciled corporations and banks should be allowed to opt for an ecu basis for reporting and tax as an alternative to sterling. This will lower the apparent boost to sales and profits in sterling of unchanged ecu turnover and will have the uncomfortable consequence of lowering tax takes, but if government and our major companies do not act as if they believe in hard money why should anyone else? It must also be close to suicidal to tax our corporates on profits that would not exist if, like continental competitors, they operated in hard currency.

Yours faithfully,

DOUGLAS WOOD

Professor of Banking & Corporate Finance

Manchester Business School

2 October

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