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Monday, 5 November, 2001, 09:44 GMT
Brown puts brakes on euro ambitions
By BBC News Online's Mike Verdin at the CBI Conference

UK Chancellor Gordon Brown has undermined hopes of a dash to embrace the euro by restating that the UK will only accept the currency if it is in the British interest.

In a speech being interpreted as a swipe at a pro-euro line Prime Minister Tony Blair, Mr Brown said the government was "considered and cautious" towards adopting the currency.

The assessment as to whether [the euro] is in the British national economic interest or not will be comprehensive and vigorous

Gordon Brown
Adopting the euro, while potentially beneficial to Britain, would only be allowed after the move had passed five economic tests laid down four years ago.

"The assessment as to whether it is in the British national economic interest or not will be comprehensive and it will be vigorous," Mr Brown told a dinner ahead of the Confederation of British Industry annual conference.

"It is only on this basis... that the Cabinet will decide whether to recommend membership to parliament and then to the British people."

Hard-won stability

The comments came a month after Mr Blair signalled he was ready to take Britain into the single European currency in the near future.

Provided the five economic tests were met, the party should "have the courage of our arguments" and go for a referendum on the currency, he told the Labour conference in a speech viewed as surprisingly pro-euro.

Gordon Brown
Gordon Brown says he will not take risks with economic stability
Mr Brown, who had hardly mentioned the euro in his Labour address, on Sunday said the government would not "take risks with Britain's hard-won stability".

But he said that Treasury officials had started preliminary work on assessing whether eurozone membership would be in Britain's interests.

"Our commitment is to complete a full assessment of the five [economic] tests within two years of the start of this parliament," he added.

The government, which is this week sending out euro information brochures to 1.5 million small firm, has spent more than 23m preparing for any changeover, the chancellor said.

'More discipline'

Mr Brown eased CBI concerns that, while the war against terrorism would swallow up extra cash, he would not allow public spending to spiral.

"As I have told my Cabinet colleagues, and I now repeat publicly, in [non-defence] areas of spending this is the time for more discipline, not less".

The government would stick by a pledge to balance its books over the course of an economic cycle.

He also warned that, because of the slowdown among major economies, the UK faced testing times.

But, with UK interest rates and inflation low, and public finances "stable", the chancellor said he was "cautiously optimistic" about the future.

The government would also support entrepreneurship by, in the next Budget, reducing corporation tax for small firms, and cutting to 10% capital gains tax on business assets held for more than two years.

He dashed speculation that the Railtrack crisis had tempered the government's ambitions to use private capital to fund public sector projects.

He said that "we do best when public and private sectors work together".

'Fooling the public'

Shadow chancellor Michael Howard said Mr Brown's apparent caution on the euro was part of the process of softening the public up for euro entry.

Mr Howard told BBC Radio 4's Today programme Mr Brown and Tony Blair were playing "hard cop, soft cop" on the euro in an attempt to fool "some of the more gullible members of our community".

When the time came to recommend the euro to the public, Mr Brown would undergo a miraculous conversion, Mr Howard suggested.

'Common sense'

CBI Director General Digby Jones welcomed the Chancellor's continuing insistence on the five economic tests on the euro.

"I don't see that as a cooling or indeed a warming up (on the euro), I just see it as sound financial management and common sense," he told the Today programme.

Mr Jones also echoed the Chancellor's cautious optimism on the UK's ability to ride out an economic slowdown, although he conceded that some sectors, such as manufacturing, were already in recession.

And he renewed the CBI's call for a half point cut in interest rates to stimulate investment.

CBI Director Digby Jones
"It's going to be a difficult winter but it's not actually complete meltdown"
UK Chancellor Gordon Brown
"It is important to get this decision right for Britain"
Sir Alan Budd, former chief economic advisor
"The final answer to this is political and not economic"
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