Brown 'isolated' over early euro referendum

Tony Blair's policy on the single currency was under growing strain yesterday as Downing Street insisted he would not be rushed into putting the case for Britain to join the euro.

Amid growing signs of a Cabinet split on the most critical issue facing Labour in its second term, senior ministers said Gordon Brown was looking "increasingly isolated" in his opposition to an early referendum on British membership of the European single currency.

Mr Blair's aides are worried that simmering tensions between him and his Chancellor have resurfaced only days after the general election. The Prime Minister intends to launch a national debate on Britain's future in Europe this autumn, but Mr Brown fears this would prejudge his assessment of the Government's five economic tests for joining the euro.

The new tensions threaten a re-run of the confusion over the euro which bedevilled the Government before Mr Brown announced its current policy five months after the 1997 election.

Mr Blair is under mounting pressure from business to "come off the fence" over the single currency. In a letter to The Times today, a group of 18 businessmen and politicians from all main parties call on the Prime Minister to "open up a great national debate" on Europe.

They say: "The central role that Britain can and must play in the European Union needs to be set out with confidence. Within that context, a clear appraisal of the appropriate timing for euro entry can be made."

Yesterday David Clark, a close adviser to Robin Cook while he was Foreign Secretary, accused Mr Brown of being a negative and destructive influence over European policy. He said that Mr Blair wanted to join the euro but lacked the nerve to take on his Chancellor.

Mr Clark suggested the economic tests were a political device to delay a decision on the euro until after last week's election. He warned that "the window of opportunity" to hold a referendum would stay open only until the end of next year.

Some key Blair aides favour a referendum in autumn next year but some Brown advisers want a delay, possibly until after the next general election.

Although Mr Cook was not aware of Mr Clark's attack, he will continue to advocate his pro-European views in his new job as Leader of the Commons. He will attend this week's summit of European leaders in Gothenburg in his role as president of Europe's socialist parties, a post which he believes gives him a platform to air his views.

Niall FitzGerald, the chairman of Unilever, warned yesterday that companies would reassess investing in Britain if the Government continued to "duck the issue". He urged Mr Blair to clarify his policy within a year.

John Monks, general secretary of the TUC, told the AEEU union's conference in Blackpool: "Every day that passes that we stay out, our position is weakened in the European Union. If you don't take part in one of the central elements in the European project, our influence on the other element diminishes. And while we keep putting off the decision, inward investors don't put off theirs."

Downing Street said Mr Blair was happy for the current debate on the euro to continue but insisted: "There is a difference between a debate and the Government actively campaigning to join." It said that if the tests were met and the Government recommended entry, it would campaign for membership, but added that "we are not at that stage yet".

But Sir Richard Needham, vice-chairman of NEC Europe and a former Tory minister, warned that "inconclusiveness" would continue the "decline of Britain's manufacturing base".