Editing Five economic tests (section)

==History of the tests==
The five tests were designed in 1997, shortly after the [[Labour Party (UK)|Labour Party]] replaced the [[Conservative Party (UK)|Conservatives]] in government, by former [[Chancellor of the Exchequer|Chancellor]] [[Gordon Brown]] and his then special adviser [[Ed Balls]]. A popular story about the circumstances of Brown's and Balls' development of the tests, which has since been discredited, is that it took place in the back of a taxi while Brown was in the United States. Despite this uncertain pedigree, the [[International Monetary Fund]] deemed them to be "broadly consistent with the economic considerations that are relevant for assessing entry into a monetary union."<ref>International Monetary Fund - [http://www.imf.org/external/np/ms/2001/121101.htm United Kingdom: 2001 IMF Article IV Consultation; Concluding Statement of the Mission] 11 December 2001</ref>

The UK [[HM Treasury|Treasury]] is responsible for assessing the tests. It first did so in October 1997, when it was decided that the UK's economy was neither sufficiently converged with that of the rest of the EU, nor sufficiently flexible, to justify a recommendation of membership at that time. The government pledged to reassess the tests early in the next Parliament (which began in June 2001), and published a revised assessment of the five tests in June 2003. This assessment ran to around 250 pages and was backed up by eighteen supporting studies, on subjects such as housing, [[labour market flexibility]], and the euro area's monetary and fiscal frameworks.<ref>{{Cite web|url=http://www.independent.co.uk/voices/comment/how-the-blair-government-decided-against-adopting-the-euro-a6937736.html|title=How the Blair government decided against the euro|date=2016-03-17|website=The Independent|language=en|access-date=2019-05-09}}</ref>

The conclusions were broadly similar; the Treasury argued that:
# There had been significant progress on convergence since 1997, but there remained some significant structural differences, such as in the housing market.{{citation needed|date=August 2015}}
# While UK flexibility had improved, they could not be confident that it is sufficient.
# Euro membership would increase investment, but only if [[wikt:convergence|convergence]] and flexibility were sufficient.
# The [[City of London]], Britain's financial centre, would benefit from Eurozone membership.
# Growth, stability and employment would increase as a result of euro membership, but only if convergence and flexibility were sufficient.

On the basis of this assessment, in May–June 2003, the government ruled out UK membership of the euro for the duration of the Parliament.<ref>{{Cite news|url=http://news.bbc.co.uk/2/hi/uk_news/politics/3029135.stm|title=UK 'not ready' for euro|date=2003-05-15|access-date=2019-05-09|language=en-GB}}</ref> Since the Labour government was re-elected in [[2005 United Kingdom general election|2005]], the debate on the [[European Constitution]] and subsequent [[Treaty of Lisbon]] upstaged that on the euro. Gordon Brown, in his first press conference after succeeding [[Tony Blair]] as [[Prime Minister of the United Kingdom]] in 2007, ruled out membership for the foreseeable future, saying that the decision not to join had been right for Britain and for Europe.<ref>Times online - [https://web.archive.org/web/20100525121519/http://www.timesonline.co.uk/tol/news/politics/article2127640.ece Puritanism comes too naturally for 'Huck' Brown]</ref> However, in late 2008, [[José Manuel Barroso]], the [[President of the European Commission]], averred, saying that UK leaders were seriously considering the switch amidst the financial crisis.<ref>EUobserver - [http://euobserver.com/?aid=27203 Britain closer to euro, Barroso says]</ref> Brown later denied this.<ref>AFP - [https://archive.today/20130124224045/http://www.google.com/hostednews/afp/article/ALeqM5ieUiScklfMN2vCWN3uguenxrklEw Britain says no change on euro after EU chief's claim]</ref>

One of the underlying issues that stand in the way of monetary union is the structural difference between the UK housing market and those of many continental European countries. Although home ownership in Britain is near the European average, variable rate mortgages are more common, making the retail price index in Britain more influenced by interest rate changes.<ref>MacLennan, D., Muellbauer, J. and Stephens, M. (1998), ‘Asymmetries in housing and financial market institutions and EMU’, Oxford Review of Economic Policy, 14/3, pp. 54–80</ref>