Europe row dominates campaign

Conservative leader William Hague and Chancellor Gordon Brown have clashed over the euro as the last fortnight of the election campaign begins.

Despite Prime Minister Tony Blair's call for the national debate to switch on to schools and hospitals, it is Europe and tax that continue to overshadow all other issues.

Tony Blair with student Jo Balchi in Southampton

The Liberal Democrats will be hoping to highlight their policies on health, pensions and crime on Thursday, while the official Labour theme was expected to be reform of the NHS.

Lib Dem leader Charles Kennedy and former leader Sir Paddy Ashdown are due on stage together for the last time before the election at a party rally in Bristol.

But Europe - and whether the UK should sign up to the single currency - looks set to remain the lead issue in election campaigning, as it has been since Lady Thatcher made her call on Tuesday to rule out euro membership for ever.

Mr Blair will argue on Thursday that it is patriotic to fully engage in Europe and in a major speech will say that being outside the eurozone hindered Britain's capacity for playing a leading role in Europe.

Lord Tebbit twist

Both the pro- and anti-euro heavyweights tackled the subject on Wednesday night.

In a further twist, former cabinet minister Lord Tebbit reported that he had been told of a pro-euro intelligence services plot to infiltrate the anti-Europe United Kingdom Independence Party.

As the penultimate week of campaigning gets under way, there is little sign from the latest opinion polls that the Conservatives are doing enough to catch the Labour lead.

William Hague with student Natasha Chavrimootoo

A Mori poll for Thursday's Times poll shows Labour on 55% (up 1% since last week), the Conservatives on 30% (up 2%) and the Lib Dems on 11% (down 1%).

A Gallup poll for the Telegraph poll shows Labour and the Conservatives unchanged from a week earlier on 48% and 32% respectively, and the Lib Dems on 15% (up 2%).

In a set-piece speech to business leaders on Wednesday evening, Mr Brown said Conservative policy on the euro could put Britain's economic ties "at risk".

He said: "Those in Britain who seek to withdraw from Europe, who call for renegotiation, who would base crucial long term decisions not on the best interests of the economy, but on short term ideological imperatives, put our economic ties on both sides of the Atlantic at risk."

European Commission denial

Mr Hague told BBC One's Question Time programme that the election campaign amounted to a referendum on the euro - and if Labour were to win, the pound would "almost certainly be lost".

He said that if Labour were to win, "the pound was sunk". If the Conservatives were to win, "the pound stays".

Earlier, the Conservatives had said that a leaked European Commission document showed there were plans to harmonise tax across the EU - leading to rises in the UK.

This was denied by Labour and the European Commission itself.

EU Commissioner Frits Bolkestein said: "I should also like to make it perfectly clear that I am not in favour, and will never be in favour, of any harmonisation of income taxes."

The Tories have since accused him of "outrageous meddling" in the election campaign.

Liberal Democrat leader Charles Kennedy turned his fire on former Tory prime minister, Lady Thatcher.

She had driven a "coach and horses" through a carefully crafted party compromise, he said.

Ready for the euro

Mr Kennedy warned that Tory Euro-sceptics could force the UK out of the European Union.

"If you follow the logic of Lady Thatcher's stance, that is heading very much in the direction of exit," he said.

Liberal Democrat foreign affairs spokesman, Menzies Campbell, meanwhile, said he believed that the UK would meet the five economic tests needed to allow the euro to be adopted.

His only reservation was getting the pound to join the single European currency at a lower exchange rate than at present.