THE CHANCELLOR’S speech on the euro in Parliament yesterday was an amazing performance. You could listen to two thirds of it and expect that the peroration was going to be the announcement of a pro-entry referendum campaign tomorrow.

Gordon Brown heaped paeans of praise on the long-term benefits of going in. most particularly large gains in trade and significant gains in economic growth.

I flatter myself that he seem to have absorbed several ideas that I have published over the past 12 months, especially the idea that the decision should be made on the national economic interest and that an ideal figure for the conversion rate between euros and pounds would lie between 1.35 and 1.40 (last month’s average was 1.39).

He did not, however, directly address my criticism that his famous five tests did not, in fact, contain any clear definition of the national interest in economic terms, although he made not a bad fist of appearing to do so.

Nevertheless, at the end, he asserted that two of the five tests (see below) had not yet quite been passed, so that the basic answer to the prime question was “not yet”.

Much of the speech was technical and sophisticated. When Tory MPs couldn’t understand it, they resorted to giggling. Unfortunately there was also some higher truth in their scepticism, because the speech contained major contradictions, both within the economics and between the economics and the politics.

The Chancellor ended with a rousing promise of a strong government campaign to persuade the public to come to love the euro within a space of maybe as little as 10 months, ie between now and the next Budget, in which he promised a re-evaluation.

So which two tests had been failed, and why? The first was convergence, the second flexibilit’ that our employment system, for example, was already perhaps the most flexible in the world. How then could it get any better?

On convergence,,~ On the subject of the latter he was confused. He more or less conceded

however, Mr Brown was quite concrete. The exchange rate was right, the business cycle was acceptable, but unfortunately there remained the question of the interest rate: although the euro and UK rates had been getting closer, there was still a gap of one and three quarter points.

At that point, in logic, he should have said that to plan for early UK euro entry the Bank of England would have to begin easing down the British rate, even if that meant violating the existing inflation target. (He did speak of revising the inflation target, but only in a statistical, not an economic sense).

I believe that because the housing market is on its way down, such a programme would be most unlikely to generate a harmful inflation rate. Mr Brown could have disagreed with me, but he did not.

Instead he addressed a different question, namely whether there is something special in Britain that not only makes our housing market especially volatile but also makes this volatility specially destabilising to the whole economy.

He gave a numerical example to show how this situation could give us trouble under the “one size fits all” euro interest-rate system. Finally, he presented new domestic policies that might help to ameliorate this whole complex of problems.

I don’t believe any of it. But that is a matter of opinion. The most sympathetic interpretation is that the Government could claim that the convergence test had in fact been passed as soon as some new remedial policies had been started upon. Otherwise, to follow

Gordon Brown logically, if the convergence test “fails” today on his current grounds, those same grounds will prevent a referendum inside this Parliament.

Consequently, I claim that Mr Brown was just making economic excuses for political fear of the opinion polls. But sophisticated polls show that an unswerving 12-month campaign, accompanied by detailed economic argument, would convert the present state of 2:1 opposition into at least

3:2 agreement.

In such a campaign, the Government would tell the people that the long-term national economic benefits of being in the eurozone are very large and that the short-term conditions for smooth entry are now as ideal as they are ever likely to be. The exchange rate is perfect, and even the Prime Minister has been known to remark that the parlous state of the German economy, in removing a normally feared competitor, is a plus rather than a minus.

It is clear that the Chancellor does not like to be seen as an intrinsic Eurosceptic. Certainly his words denounced that idea. David Owen, debating with me on CNN, said he thought Brown would genuinely like to go in, but only on his own terms and after he had become Prime Minister. I certainly agree with the idea that, despite the intellectual confusions of his public statement, he has outmanoeuvred the Prime Minister politically.

From this whole affair, however, I cannot but conclude that the British people will never go in. Something will always come up. The goalposts will always be moved. The economic costs will be substantial, but not catastrophic. The pound will be rather unstable. The premium charged by the money changers for converting pounds into euros will continue to be outrageous, but we will still continue to visit France. For my country I am sad, but not suicidal.