Major may cave in on Euro debate

Leaked Treasury and EU papers plunged the Government into further crisis yesterday, as Labour accused ministers of withholding vital information on monetary union from Parliament. One of the documents shows that the Treasury accepts proposals about preparations for the single currency "will not be acceptable to Parliament".

With John Major under mounting pressure to concede a full Commons debate on the single currency, the Chancellor, Kenneth Clarke, made it clear privately that he is happy to defend the policy in the Commons, if the Prime Minister wants him to do so. Rebel Tory MPs have made clear their determination to debate the issue, potentially leading to a dangerous Commons defeat for Mr Major.

One leaked paper from the European Monetary Institute, which Mr Clarke told MPs last week was too confidential for them to see, lays down that UK economic and monetary policies will have to be "closely monitored and assessed" irrespective of participation in EMU. This process is dictated by the Maastricht Treaty and "the smooth operation of the single market", it says.

A source said: "There will be even greater scrutiny than the Government has admitted to its Eurosceptics."

The second document, from the EU Monetary Committee meeting on 19 November, insists that all member countries must have "convergence programmes" whether they sign up for the single currency or not.

And a confidential Treasury assessment of problems arising from proposed curbs on budget deficits says that the so-called Stability Pact "will not be acceptable to Parliament". Under some proposals EU countries running bigger deficits than the rules allow would be fined heavily, and the money given to Brussels.

On Friday the Chancellor wrote to MPs insisting that countries which stay out of EMU will only be obliged to share information about their economic performance, adding: "Beyond that the economic policies pursued will be those freely chosen by the states in question."

Mr Clarke said: "If any future attempt were made concerning convergence among the `outs' to include provisions affecting the freedom of action of states in respect of their economic policies, as opposed to simply the provision of information, we would not be able to agree it."

Disclosure of the three documents is certain to fuel Eurosceptic wrath about Britain's involvement in the preparations for a single currency, and increase backbench and Opposition pressure for a debate on the issue that the Government could lose.

Gordon Brown, shadow Chancellor, argued: "Parliament has only been told half the truth. Vital papers about vital decisions are being withheld from MPs. A special debate is even more important than ever. It is a principle of parliamentary scrutiny that ministers may run, but they cannot hide. There must be a debate this week."

Sir Marcus Fox, chairman of the 1922 Committee of backbench Tory MPs, is to meet John Major tomorrow, amid mounting speculation that the Government will be forced to back down and allow a debate on moves towards a single currency ahead of the European Union summit in Dublin next month.

Labour officials believe the Opposition could defeat the Government in a procedural vote over Europe, even if John Major has the support of the Ulster Unionists. For the Government there was a potentially fatal meeting of minds among pro- and anti-European Tory MPs yesterday, joining the clamour for a full-scale parliamentary debate.

Edwina Currie, the Europhile ex-minister, told the European Movement's congress in London: "Democracy's had a bad week. The nation has been denied the chance to hear their elected representatives debate the most critical issue facing the nation, the single currency. The denial of a debate in the House verges on censorship."