Myths about the pound in your pocket

Sterling is nothing to be proud of. So why not a single European currency, asks Brian Cathcart

PICTURE the supermarket checkout of the year 2005: "That will be 75 ecus please." Or the pub: "One Scotch, one bitter and a packet of crisps ... five ecus and 25 cents, sir." Or the building society: "How big a mortgage did you have in mind, madam?" "Oh, about half a million ecus, please."

This is what so many senior Conservatives are so desperate to prevent: British people forsaking their historic pound and talking and trading in the same currency used by Frenchmen and Germans.

Would it be such a big deal? Would Britain really miss the pound? I can't think why.

To start with, there can not be a single soul who would regret the passing of the ugly, overweight coin that is the currency's modern manifestation. The "round pound" was universally panned when it was introduced in 1983 and it has since won only the most grudging acceptance. How could anybody have thought this was a fitting embodiment of the national currency?

And we can hardly love it as the sum of its parts. It is only 24 years since we dumped shillings and old pence, and the coinage that replaced it has undergone so many changes that the vending machine business is close to despair. The sixpence and half-crown are gone, as is that tiny halfpenny; the 20p has arrived, while the 5p and 10p coins have shrunk and the 2p and 50p will surely follow them. Indeed, the Mint is currently conducting a formal review of the whole coinage and goodness know what that portends.

The notes, too, are always being redesigned, and rarely with artistic merit. Answer this without checking: who is on the £10 note, Newton, Wellington, Dickens or Faraday? And what colour is it? Even if you know, you would be unwise to bet on the answers being the same in a couple of years. Like the coins, the notes get smaller all the time, and there is even talk of them becoming plastic.

The Queen's face on the currency is its hallmark, but that, too, is less than satisfactory. Have a look: with respect, she has not looked like that for some time. And even if you are attached to the face as it is, the attraction will surely diminish at that date in the future when it is replaced by the face of Charles III.

If there is any deep national affection for the pound as a physical thing, mucking about with it as has been the habit in recent years is a very odd way of expressing it. Would you allow the Royal Mint to refit your bathroom, or the Bank of England to decorate your living-room? Never; you care too much for your home to allow such a thing, yet you let these people design the pound.

So much for the coin and note; what about the pound as a piece of British history? Even here its hold on national sentiment may be less strong than we suppose.

Yes, it traces its origins back to Offa of Mercia's reign in the eighth century, when it was accepted that 240 silver pennies should weigh one pound, but as recently as a generation ago many British people were still speaking and thinking in a different unit: the guinea. And not long before that the common coin which represented 20 shillings was not called the pound but the sovereign.

Perhaps, then, we are attached to the pound because, unlike the Italian lira or the Belgian franc, it has a handy value. Bus tickets never have to be denominated in thousands of pounds, even the Chancellor of the Exchequer rarely has to think in trillions, and quite large sums can be accommodated on the screens of the most modest pocket calculators.

Yet this handy value is a moving target. Twenty-eight years ago, when Harold Wilson was reassuring the country about "the pound ... in your pocket or purse or in your bank", he was talking about something that had almost 10 times the buying power it has today. Even now, when there is often talk of the inflation dragon being tamed, the pound is losing buying power at the rate of more than 3 per cent a year.

This changeable character of the pound is even more vividly seen in the foreign exchanges. When Wilson devalued he brought the pound down from $2.80 to $2.40; in 1949 it had been worth $4.03; last Friday it traded at about $1.58. (The ecu, by the way, traded at 80p, so it is closer to the pound's current "handy value" than any other European currency but the Irish punt.)

And whatever its value today, by the time you wake up tomorrow morning the pound will be worth something slightly different, both at home and abroad, and it is likely to be noticeably different in five years.

So it can't be the coin, and it can't be its intrinsic value; perhaps what British people like about the pound is that it is British.

Yes, up to a point. But it would be a mistake to imagine that it is under British control. On Black Wednesday, it was was not the then Chancellor, Norman Lamont, who took control of the pound; it was the international currency market. Traders from New York, Tokyo and Hong Kong, as well as from Paris, Rome, Frankfurt and London, sold sterling so vigorously that no one, not Mr Lamont, not the Bank of England, not the Bundesbank and not all the finance ministers in the European Community, could save it.

Before that day, in the brief interval between John Major taking sterling into the exchange rate mechanism of the European monetary system and Mr Lamont taking it out, the British people enjoyed more sovereign control over their currency than they did before or than they have since. Chancellors representing the elected government met their European counterparts regularly to review the state of the ERM, and they had the power to adjust rates within it to reflect differing levels of economic performance in different countries.

Now the Chancellor and the Governor of the Bank of England may influence the pound's value through changes in interest rates, but they do so on their own, without European support, and the market is much more free to ignore them if it wishes. It did so last week, giving a clear signal of defiance to the Chancellor and pushing the pound down for a time in protest at the Government's muddled signals on European monetary union.

The pound is not a continuous value; it is not a physical entity of any distinction and it is not, in reality, under British sovereign control. It is a word, nothing more. It has symbolic significance as a link with the past, but as this government is always telling us, not all links with the past are worth preserving, particularly if something better comes along. Getting rid of it (which Canada, Australia and New Zealand, among others, have all done) would be little more painful than decimalisation, and much more useful.