Tories seize on Labour euro splits

Tony Blair remains pro-euro

Tony Blair's government is split from top to bottom over the euro, says shadow chancellor Michael Howard.

Amid reports that wrangling has delayed the government's decision on euro entry, Downing Street says Tony Blair and Gordon Brown are continuing "intensive" talks on the issue.

Mr Howard's comments came as Tory leader Iain Duncan Smith effectively told the prime minister to put up or shut up over the single currency.

Either have a referendum or rule it out

Iain Duncan Smith
Tory leader

And Liberal Democrat leader Charles Kennedy said Tony Blair now had to show some political resolve on the issue.

In a speech in London, Mr Kennedy said: "If the prime minister and the chancellor duck the issue of a referendum yet again, we will have lost more than a historic opportunity to join the single currency.

"We will also have lost the chance to rebuild British credibility in Europe."

Chancellor Gordon Brown is due to announce by 7 June whether the five economic tests for the UK joining the euro had been met.

Mr Brown, widely seen to be more eurosceptic than Tony Blair, told GMTV's Sunday programme he was pro-Europe, insisting he would back euro entry if the economic circumstances were right.

National interest

But Mr Duncan Smith challenged the prime minister to hold a referendum if he was serious about Britain joining the single currency.

"If not, he should rule it out for the rest of the Parliament. Either have a referendum or rule it out," he said.

Both sides of the euro debate are intensifying their case ahead of the deadline for the verdict on more than 2,000 pages of Treasury analysis on the merits of UK euro entry.

It is widely expected that the result of there will be a "not yet met" assessment of the tests.

Mr Brown controls the tests

The pro-euro camp want to ensure an early referendum is not ruled out.

Business leaders who represent 25 of some of the biggest companies operating in the UK have signed a letter predicting dire economic consequences if the UK does not adopt the euro.

The signatories include Sir Chris Gent, chief executive of Vodafone, Peter Sutherland, chairman of BP, and Lord Simon of Highbury, the former Labour minister.

The letter says: "The working assumption of business has been Britain is a 'pre-entry' country.

"If it becomes apparent that this is no longer the case, the government must be aware that will constitute a significant change in the business climate of this country."

German example

The business leaders' view is not representative of British industry as a whole.

The president of the CBI, Sir John Egan, is a eurosceptic who has said business backing for the single currency is fading.

The decision we are taking is not whether we will join the euro but it is when we will join the euro

John Reid
Labour chairman

Mr Howard said the UK would lose control of the right to set its own interest rates if it joined the euro.

He said that Germany, with unemployment "approaching five million" needed lower interest rates but could not have them because rates were set according to the economic health of the whole euro zone.

Timing?

On Sunday, the Leader of the Commons, John Reid, told ITV1's Jonathan Dimbleby programme that there was no question Britain was going to join.

"It (Mr Brown's statement) is a decision for now, it doesn't bind us for any specified period in advance because the decision we are taking is not whether we will join the euro but it is when we will join the euro."

Mr Blair's official spokesman said: "There are intensive discussions that have been going on for some time between the prime minister and the chancellor.

"There would clearly be a discussion at cabinet before a final decision is taken and then, obviously, an announcement made in pretty short order after that," he said.

"In terms of precisely when that will be, I can't tell you. I don't think it is settled yet."