Chancellor signals euro caution

THE rivalry between Tony Blair and Gordon Brown was highlighted again on Sunday night when the Chancellor stressed the need for caution on joining the European Union single currency.

Just weeks after the Prime Minister slammed his foot on the accelerator and suggested the UK should sign up to monetary union before the next election, Brown was still applying his to the brakes.

Addressing the CBI eve-of-conference dinner in Birmingham, he said the Government's approach would be 'considered and cautious' and 'one of pro-euro realism'.

While acknowledging that membership of the single currency club could bring benefits, he emphasised that the assessment of his five economic tests should be 'rigorous and comprehensive'. He added: 'To short-cut or fudge the assessment and to join in the wrong way or on the wrong basis without rigorously ensuring the tests are met would not be in the national interest.

'The Government is determined that we will make the right long-term decision for Britain and we will not take risks with Britain's hard-won stability. So the assessment as to whether it is in the British national economic interest or not will be comprehensive and rigorous. It is only on this basis, taking into account all the relevant economic information, that the Cabinet will decide whether to recommend membership to Parliament and then the British people.'

When the Prime Minister addressed Labour's party conference last month he was far more upbeat about the single currency and his message was interpreted widely as an appeal for more speed and enthusiasm for the euro both within Government and among the British people.

Brown announced that earlier cuts in capital gains tax will be further extended so that business assets held for two years will be taxed at a 10% rate compared with 40% when Labour took power in 1997. Cuts in small company corporation tax will also be increased and the VAT system simplified along with new cuts in red tape to help small companies.

Earlier, the Chancellor vowed that euro entry preparations will continue despite a warning from former Treasury chiefs that Britain will not be ready in the lifetime of this Parliament. A report commissioned by New Europe and Business for Sterling which concluded that the five economic tests will not be met in a 'clear and unambiguous' way over the next two years was backed by six former senior policy advisers.