Brown makes his euro test tougher

GORDON Brown pushed back the prospect of early entry to the euro on Wednesday night by raising the threshold on the tests for joining. In a clear riposte to Cabinet europhiles who tried to talk down his role, the Chancellor said he will decide if the economy is right to join.

He told City financial chiefs in his Mansion House speech that Britain would enter the euro only when he felt his five economic tests had been passed. And he went out of his way to give himself the leeway to decide against early membership.

Using his most emphatic language yet, the Chancellor insisted the five tests are 'serious' and not 'window dressing.' He said the tests - and by implication his own opinion - must be the 'decisive factor' in whether Britain join's the single currency.

And he introduced tough new criteria that must be met. For example, the housing market, consumer spending and 'business cycles' would be included in 'the most rigorous and comprehensive work the Treasury has ever done', he said.

Brushing aside colleagues who suggested a decision would be taken by the whole Cabinet, Brown stressed that his opinion would be most important. The Chancellor told his audience in the City: 'If the tests are met, I believe we should go in. If the tests are not met, we should not. The tests are decisive. There is no hidden agenda - only a resolution to make the right long-term decisions for Britain and the national economic interest.'

He denied that the economic tests are a delaying tactic allowing Labour to wait until opinion polls show it may win a referendum. He said: 'There will be no fudging or short-circuiting as we measure the effect of the euro on employment, growth, investment and stability.'

Senior Tories were sceptical, claiming the Chancellor is simply trying to pave the way for a 'Yes' vote when the British people are asked to decide the issue in a referendum. They accused him of a 'con trick', saying he is trying to boost his reputation as a single currency doubter in order to win over people who are genuinely against the idea. A spokesman claimed the Chancellor was feigning reluctance to join the euro so he can impress wavering voters when he decides the time is right to go in.

The Government is committed to completing its assessment of the tests by 7 June next year before deciding whether to recommend joining the euro in a referendum. The actual decision is expected around the turn of the year, however.

Brown said the tests go 'to the heart' of what is required for the long-term future of the UK economy. It is the 'biggest peacetime economic decision' the country has had to make, he added. The Chancellor said: 'It is because of its constitutional significance as a decision that we said in 1997 that the economic benefits should be clear and unambiguous.'

Brown said joining the single currency held out the prospect of lower prices, expanding trade and sustained high rates of growth and employment - which would be a 'prize to be valued'. But he was careful to balance this with a warning that to join without the tests being met would risk Britain's stability and a return to the days of a 'stop-go' economy. He repeated his words from last year's Mansion House speech, saying that Labour's approach is 'considered and cautious - pro-euro realism'.

Brown also said he would support the Bank of England in raising the base rate from 4%. But Bank of England Governor Sir Edward George played down the prospect of an early rise, saying it might not be necessary. He told the financiers that the Bank did not necessarily have to 'deliver immediately' and still had some leeway before making a decision on a rate rise.

But he made it clear if consumer spending does not slow down, the Bank will have to act. Sir Edward said: 'It is important that borrowers and lenders should understand and take account of that possibility in their decision making.'