New splits over UK euro entry decision

Source: Financial Times

The battle between cabinet ministers over the euro spilled into the open yesterday as pro-single currency members of Tony Blair's government vied to keep alive the prospect of a referendum before the next election.

John Reid, leader of the House of Commons, insisted that a decision within the next few weeks on whether to join the euro would be "for the time being ...a decision for now". It would not bind Labour to any specified future period. "The decision we are taking is not whether we will join the euro, but it's when we will join the euro," he said.

His remarks are likely to infuriate Gordon Brown, the chancellor, who in previous arguments with Mr Blair has always insisted that the formulation must be "if", but not when.

Mr Reid's intervention comes as pro-euro campaigners step up pressure on the prime minister today with a letter signed by 25 business leaders and heads of multinationals. The letter warns that a decision to rule out entry for the rest of this parliament will damage Britain's economy.

Sir Christopher Gent, chief executive of Vodafone, Peter Sutherland, chairman of BP, and Lord Simon of Highbury, the former Treasury minister, are among the signatories who claim foreign investment would be hit. Ford, Boeing and Siemens have signed, as have Sir Gulam Noon and Lord Hollick, both Labour donors.

Mr Brown will publish the results of the Treasury's economic assessment of euro membership by June 7. He is expected to say the UK economy has not sufficiently converged with the eurozone and there is not enough flexibility for membership.

However, Mr Blair and Mr Brown have yet to resolve how much room to leave in the chancellor's statement for a referendum before the next election.

Mr Reid, speaking on ITV's Jonathan Dimbleby programme, stressed the cabinet's role under Mr Blair's leadership as "first Lord of the Treasury" in settling the single currency question.

The chancellor, who is thought to favour closing down the prospect of a referendum this parliament, indicated in an interview on GMTV that discussions could continue until the last possible moment. He insisted it would be wrong to rule out joining the single currency "on grounds of dogma", but also made it clear Europe still had some way to go on economic reform.

The reform agenda was "absolutely crucial", he said, if the continent was to solve high unemployment and raise growth rates, the chancellor said.

Mr Brown is confident that new members of the enlarged EU will support the dismantling of internal barriers to the single market at a meeting of EU finance ministers tomorrow.

Allies of the chancellor questioned the logic of remarks from Helen Liddell, the Scottish secretary, who had suggested there should be a "sixth test" on the cost of not entering the euro - in addition to the five existing tests that make up the Treasury's economic assessment.

Ms Liddell's stance caused irritation at the Treasury, where officials said the five tests included an assessment of the costs of staying out.