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EDITIONS
Thursday, 27 June, 2002, 00:58 GMT 01:58 UK
'No fudging on euro' - Brown
Gordon Brown (right) with Lord Mayor, Alderman Michael Oliver on Wednesday
It was one of the chancellor's key annual addresses
Chancellor Gordon Brown has stressed the government's five economic tests will still be the key factor in the decision over whether Britain should join the euro.

In his keynote Mansion House speech, Mr Brown said the future of the UK's economy was crucial to any decision to join, and dismissed speculation the tests would be watered down.

The chancellor also expressed cautious optimism about the economy - saying he believed Britain was "well-placed" to weather the storm of business collapses.


The tests are decisive - there is no hidden agenda

Chancellor Gordon Brown

He also urged doctors, teachers and other public sector staff to look to UK central bankers to view best practice in the public sector.

Mr Brown, who has been perceived as less enthusiastic about the euro than Tony Blair, made a point of describing himself to his audience as a "pro-European".

'Long-term future'

He said being a member of the single currency could bring the prospect of lower prices, expanding trade and sustained high rates of growth and employment - a "prize to be valued", he said.

But the chancellor balanced any enthusiasm by clearly pointing out that without the five tests being met, there would be a risk of prejudicing Britain's stability, sending it back to the days of a "stop-go" economy.

"Being serious about the economics of the euro means being serious about the five economic tests," he said.


There will be no fudging or short-circuiting as we measure the effect of the euro on employment, growth, investment and stability

Gordon Brown

"The five tests go to the heart of what is required for the long-term future of our economy.

"The tests are, in my view, important to everyone who cares about the economic future of Britain."

Mr Brown said deciding whether to enter the euro would be the "biggest peacetime economic decision" the country had had to make and promised the assessment of the tests would be "the most robust, rigorous and comprehensive work the Treasury has ever done".

He fiercely rejected opposition claims that the tests were merely "window dressing" for a decision that would be taken on political grounds and was already a foregone conclusion.

"There will be no fudging or short-circuiting as we measure the effect of the euro on employment, growth, investment and stability," he said.

"The tests are decisive. There is no hidden agenda."

Opposition scepticism

However, his comments are unlikely to defuse opposition scepticism.

"Ultimately, he said it would be a political decision," Michael Howard told the BBC's Radio 4 Today programme.

"I think the only test the government are applying is whether they think they can win a referendum."

"The truth is that giving up the pound and giving up control of our economy would mean higher unemployment and lower living standards," Mr Howard added.

"On any serious economic test, the answer must be to keep control of our economy and keep the pound."

The Liberal Democrat's shadow chancellor Matthew Taylor welcomed the Chancellor's speech.

"Crucially, we now know that Gordon Brown believes that, if passed, the tests are decisive in making the case for joining the euro. Liberal Democrats agree, and surely the Chancellor should now give us one final detail - his timetable for deciding," he said.

Rate 'leeway'

The chancellor went on to restate his faith in the future of the UK economy and signalled he would stand by the Bank of England if it raised interest rates.

Later in his speech to the City, the Bank of England Governor Sir Edward George ruled out an early rate rise.

He said with inflation comfortably below the government's target rate, the Bank did not necessarily have to "deliver immediately", and still had some leeway before making a decision on a rate rise.

Mr Brown braced public sector workers for more changes on top of the shake-ups introduced during Labour's first five years in government.

"Public sector reform has only just begun," Mr Brown said.

The Bank of England, which was in 1997 given independence and control over setting interest rates, was a paragon for other services to follow.

"I believe there are lessons to be learned from the widely acclaimed success of Bank of England independence," he said.

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 ON THIS STORY
Chancellor Gordon Brown
"There will be no fudging or short-circuiting as we measure the euro's effect"
Conservative shadow chancellor Michael Howard
"The answer must be to keep control of our economy"

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