Europe cannot keep its huge farming subsidies, says Brown

Gordon Brown called for an overhaul of Europe's unwieldy Common Agricultural Policy yesterday as part of fundamental economic reforms intended to prepare the EU to admit up to 15 new members over the next decade.

The Chancellor insisted the blueprint, to be presented to this month's summit in Barcelona of European leaders, was aimed at making workable the EU's planned eastward enlargement. But as he attempted to dampen the growing speculation at Westminster that a referendum on the single currency could be staged next year, the revamp will be seen by many MPs as a fresh condition for Britain joining the euro.

A Treasury White Paper called for reform of labour market policies in a push towards full employment, for a fresh emphasis on life-long learning and for moves to encourage people with professional qualifications to work abroad.

It called for "lighter and better-targeted" regulation to boost enterprise, liberalisation of capital markets by 2003, with the framework in place for a single market in financial services by 2005, and more competition in gas and electricity supply across the EU. The paper also backed a drive against badly drafted EU regulation, which is believed to waste about £30bn a year.

It also stressed the importance of the reform of the Common Agricultural Policy (CAP) to stop it becoming a drain on EU finances. The Government believes the CAP cannot continue unamended if the EU is to cope with the pending membership of former Eastern Bloc countries, many of which have largely agricultural economies.

Launching the White Paper, Mr Brown said: "We will have the greatest growth in future years if in Europe [these] capital, labour and product market reforms ... go ahead, because they are vital to the challenges of global economic competition and meeting them, to EU enlargement and to reducing unemployment. Being in Europe, and leading in Europe, is, I believe, right for Britain and for British interests and I believe that [this] economic reform agenda ... is the means to a far more dynamic, job- creating, socially inclusive and prosperous Europe."

But Michael Howard, the shadow Chancellor, accused the Government of hypocrisy, wanting less regulation in Europe but over-regulating business at home. He said the Government had introduced 4,642 regulations last year.

Speaking in the Commons earlier, Mr Brown made clear his determination to wrest the initiative from pro-European ministers pressing for an early vote on the single currency. He said the assessment of the Government's five economic tests for membership had not even started. He added: "We are doing the work that is necessary for this economic assessment to take place."

His comments were markedly more cautious than comments last week by Peter Hain, the minister for Europe, who said Mr Brown could reveal his assessment as early as this autumn, potentially leading to a referendum in spring 2003. The Treasury's irritation with his remarks was underlined this week when Ed Balls, the Chancellor's chief economic adviser, said rushing into a decision would be a mistake.