Personal Finance: It does not actually matter what we call our currency so long as it is dependable

THE EUROELECTIONS may have been a spectacular yawn for voters, but at least we now know that, if William Hague and the bulk of the popular press get their way, "saving" the pound will be the most publicised issue at the next election. If so what are the implications for individual savers and investors?

Sentiment aside, it does not actually matter what we call our currency, so long as it is strong, dependable and handy to use. Over the last 50 years sterling has a better record than the franc, the lira and the peseta, but, until recently, it has not compared well to the mark, the yen or the US dollar, and, on purely objective grounds, it certainly does not have an irresistible claim to survive.

If the UK does adopt the single currency, the actual rate at which sterling is translated into euros is extremely important. If the pound was pegged at the current rate of one euro for 65p British companies would be locked into an uncompetitive exchange rate in Europe. If the euro is fixed much above 75p British suppliers would be able to compete profitably in Europe but our imports would cost more and there would be risk of reviving inflation in the UK.

There is however no inherent reason why a euro should be any more prone to inflation than the pound. Indeed the signs are that the European Central Bank will be at least as successful as the Bank of England in fighting off inflation, and can continue to do so with significantly lower interest rates than in the UK.

The idea that it will seriously threaten our culture if our notes and coins do not carry the Queen's head is even more preposterous. But saving sterling has proved itself the Tories' best vote-winning issue by a long chalk and in spite of his brave words it will be a political miracle if Tony Blair defies the Sun and allows William Hague to wrap himself in the Union Jack. It seems inevitable now that even if the Tory grandees offer to help in a national campaign to promote the advantages of joining the euro the Prime Minister will be firmly told by his advisers not to lift a finger to promote the Euro until well after the next election, so for better or worse we will be stuck with sterling until at least 2005, maybe 2007.

In the meantime the Bank of England will only target inflation and will do nothing to affect the exchange rate. That in turn means we are likely to have to live longer with an overvalued pound and higher interest rates than UK industry and individual borrowers would like. If so neither the UK stock market nor the residential property market seems to care however. Shares are buoyant and the Bradford & Bingley which took over the Black Horse agencies said this week that properties in places like Luton, Loughton and Sutton are selling on average in a week or less, and the national average is just under six weeks. But turnover is still small because home- owners want to buy before they sell and would-be buyers outnumber sellers by five to one. In South-east England that rises to a massive 11 to one, compared with just seven to one in February.