Five economic tests

The five economic tests were the criteria defined by the UK treasury under Gordon Brown that were to be used to assess the UK's readiness to join the Economic and Monetary Union of the European Union (EMU), and so adopt the euro as its official currency. In principle, these tests were distinct from any political decision to join.

The five tests were as follows:

In addition to these self-imposed criteria, the UK would also have to meet the European Union's economic convergence criteria ("Maastricht criteria") before being allowed to adopt the euro. One criterion is two years' membership of ERM II, of which the UK is currently not a member. Under the Maastricht Treaty, the UK is not obliged to adopt the euro.

When the Brown government was voted out of office in the 2010 United Kingdom general election, the tests ceased to be government policy.

The five tests were designed in 1997 by former British Labour Party Chancellor Gordon Brown and his then special adviser Ed Balls, allegedly 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."

The UK Treasury is responsible for assessing the tests. It first did so in October 1997, when it was decided that the UK 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.

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Wikipedia