Pound 'could go within two years'

ONE OF Gordon Brown's closest allies has predicted that Britain will have scrapped the pound within two years. Nigel Griffiths, the Small Business Minister, hinted at a significant shift in Government policy by departing from its carefully constructed stance on the euro, which has always been to refuse to set a timetable for a referendum. He said if the economy continued its present course his 'hunch' was Britain would join the euro before the next general election.

To the surprise of Labour MPs, the Treasury said Griffiths's words were ' perfectly consistent' with the Chancellor's views. Up to now the Prime Minister and Brown have resisted setting a date, pledging only that the five economic tests for entry will be assessed before June 2003. Privately, Tony Blair is known to favour early entry. But his Chancellor has always seemed more cautious.

In the past the Treasury has firmly slapped down Ministers who predicted faster progress towards ditching sterling. In February, Europe Minister Peter Hain said the pound could go by next spring, adding that those who oppose the euro were the 'enemies of Europe'.

At the time Brown let it be known that he would not tolerate Hain's 'idle speculation' about timetables. But Griffiths' words mark a significant change of tone. In an interview, the minister said: 'I think we will be in (the euro) within two years if things go as they are and we meet our economic tests, and my hunch is we will.' He urged businesses to be enthusiastic about the European single currency and claimed that, for the vast majority, the cost of a changeover would be 'minimal'.

He added: 'Any business that I visit tends to be neutral, relaxed about it and otherwise fairly enthusiastic. We will learn from the lessons of France, Portugal and other countries who have bought into the euro.'

Instead of brushing his words aside, the Treasury supported them. A spokesman said: 'The Government's position is unchanged from the statement the Chancellor gave in October 1997, which is for an assessment of the five economic tests to be made before we can have the possibility of a referendum.'

He said the Treasury was 'relaxed' about Griffiths's talk of a two year timetable. 'It is perfectly consistent with Government policy. What Nigel Griffiths has said is that there needs to be an assessment first and the Government has said that will be by June next year. It is true that we haven't put a formal timetable on things. But there is an illustrative one in the National Changeover Plan which sets out the steps we have to take,' he said.

Griffiths is a close ally of Brown and once worked for him as a researcher. He was dismissed as Consumer Affairs Minister in 1998 after a public attack on civil servants. Many critics saw his reappointment to ministerial office as a step taken by Blair to appease the Chancellor.

Janet Bush, co-director of the 'no' campaign which lobbies against Britain joining the single currency, called Griffiths's comments naive and misguided. 'The fact is that 65% of British businesses are against the euro and they are not getting any keener on it,' she said.

Business groups also expressed their concern. Sally Low, policy adviser for the British Chambers of Commerce, said: 'This is a surprise, given that there are five economic tests to be met still. It would be a very short time-frame for businesses to gear up for the changeover.' Roger Davidson, spokesman for the CBI, said a 'significant minority' of businesses still opposed the euro.

Hain will step up the pressure to scrap the pound during a pro-european speech at Chatham House in London. The Europe Minister will not mention the single currency but Labour MPs are likely to interpret his words as a coded call for early entry. Hain, believed to have been given permission by Blair to speak in favour of the euro, will say it is crucial for Britain to be at the negotiating table when the EU makes key economic decisions.