Bank plan to scrap pound in two years

A FAST-TRACK switch from the pound to the euro has been planned by the Bank of England, says a report to be issued today. The changeover will be implemented almost immediately should the Prime Minister win a referendum on joining the single currency.

The Bank says Britons could be paid and shopping in euros within two years of a decision to join - a considerably shorter timetable than adopted by the first 12 euroland entrants.

The Bank's National Changeover Plan, a 159-page report drawn up by director for Europe John Townend, will intensify speculation that the Government is planning an early campaign to scrap the pound.

A poll by the accounting firm KPMG shows that most people expect a euro referendum within a year. It also reveals that three out of four trust Gordon Brown more than Tony Blair when it comes to decisions on the single currency. The more euro-cautious Chancellor is in charge of deciding whether the five economic tests on euro entry have been met - clearing the way for a referendum.

The Bank's report warns that the changeover will be 'hugely complex' and a much more demanding operation than preparations for the millennium bug. It says a referendum could be held four months after the Government declares the five tests have been met. If the outcome is positive, euro notes and coins would be on the High Streets 24 to 30 months later.

City markets would be the first to switch to euro trading, with mass financial services, including share trading, insurance contracts and credit cards transactions, starting later. The euro would immediately be available for personal and small business customers who decide to switch. At the end of the transition period, euro notes would be officially issued to the general population on 'E-day'. Pound notes and coins would be withdrawn soon afterwards, ending centuries of British history.

The Bank confirms that in Europe the changeover did 'indeed lead to higher prices of some goods'. The report claims public opinion was influenced because everyday items such as 'coffee and newspapers' cost more in euro. But it says these are 'only a small part of the total inflation basket'. It predicts Britain will be less vulnerable to fraud than was the case during the changeover in Europe.