Anti-euro briefing by Brown camp reopens rift with Blair

TONY BLAIR clashed with Gordon Brown last night as tension between the Prime Minister and his Chancellor overshadowed the opening day of the Labour Party conference in Bournemouth.

Mr Blair adopted a more positive approach to the European single currency than Mr Brown, who is increasingly sceptical about the euro. Their relationship was also under strain after Downing Street made clear that the Prime Minister would not stand down during the next Parliament if he wins a second term.

Mr Blair's desire to emulate Margaret Thatcher by winning three general elections was seen as a big setback to Mr Brown's hopes of succeeding him at Number 10.

Although, Mr Blair and Mr Brown denied there was any rift, the Prime Minister's aides are furious that Ed Balls, the Chancellor's principal economics adviser, is adopting a sceptical line and suggesting that the five economic tests for joining the euro may not be met in the next Parliament. This would rule out British membership until after 2005.

Mr Balls has encouraged eurosceptics to read a 1992 pamphlet in which he attacked monetary union as "an economically and politically misconceived project" and warned that the social and political cohesion needed to make it work was unlikely for 20 years.

The Blair camp wants Mr Brown to "rein in" his adviser, in an echo of the tension over Charlie Whelan, who resigned as Treasury press secretary in January. "The sceptical line from Ed Balls is starting to destabilise the Government," a source said.

Interviewed on BBC Television yesterday, Mr Blair sought to divert attention from his relationship with Mr Brown by announcing that a crackdown on drug-related crime would be the centrepiece of the Queen's Speech in November. While denying any differences with the Chancellor, Mr Blair appeared to be more upbeat about early British entry into the euro than the Brown camp. He said: "Our anticipation is to have a referendum early in the next Parliament, providing economic conditions are met."

Two other senior figures joined Mr Blair's campaign to prepare the ground for British entry. Peter Mandelson, the former trade and industry secretary, told a fringe meeting in Bournemouth that the case would become "unstoppable" provided pro-Europeans had confidence in their arguments. He said Britain would lose job-creating investment by foreign companies if they believed the country would stay outside the euro.

Robin Cook, the Foreign Secretary, warned that Britain would pay an "economic price" if it remained outside the euro and "cold-shouldered" its EU partners. He suggested the decision on membership had to be based on both "political and economic" factors.

But Mr Brown insisted yesterday the decision would be taken solely on economic grounds. "There is no other test," he told BBC Television."We have said that the whole question comes down to meeting the five economic tests."

When he addresses the Labour conference today, Mr Brown will raise the prospect for the first time that Britain will achieve "full employment" for all provided there is "responsibility by all" and the Government maintains its tough financial discipline. The Chancellor will issue a "modernise or die" message to both sides of industry, and stress his belief in enterprise and competition.

Mr Brown dismissed speculation that Mr Blair had agreed to stand aside for him in the next Parliament when they decided five years ago that Mr Blair should be the modernisers' candidate in the leadership election to succeed John Smith.

Mr Blair was embarrassed by newspaper reports that he intended to remain Prime Minister for 15 years, describing them as complete nonsense. "I have never said I want to serve three terms. I have never said I want to be like Mrs Thatcher and go on and on and on," he told the Breakfast with Frost programme.

When the conference opened last night, Mr Blair told delegates to move on from the days when the party was "a glorified pressure group". He said: "It is not about getting rounds of applause, but about getting things done." He faced several demands, however, for the Treasury's estimated pounds 10bn "war chest" to be spent on improving public services and increasing the national minimum wage.