Blair: Britain will veto EU control of tax and defence

Tony Blair warned last night that he would veto important parts of a proposed blueprint for the European Union unless it preserved Britain's right to keep control of tax and foreign and defence policy.

The Prime Minister's threat came over a working dinner at Downing Street with Valéry Giscard d'Estaing, the former French president, who chairs a convention drawing up a new constitution for the EU to be published next month.

Mr Blair and M. Giscard spent around two-and-a-half hours together and were joined by the Foreign Secretary, Jack Straw, and the Welsh Secretary, Peter Hain, Britain's chief negotiator on the Convention. Downing Street said the dinner was a "useful opportunity to exchange views".

Mr Blair's move was part of a concerted fightback by the Government, which has been thrown on to the defensive by a campaign for a referendum on the EU treaty, led by Eurosceptic newspapers and taken up by the Tory opposition. Downing Street dismissed media reports about the EU proposals as "hype".

But the Prime Minister sought guarantees at last night's dinner that a proposed post of "EU Foreign Minister" would be chosen by national governments and said he opposed plans for a single legislative council, which would become the focus of all new European law.

Despite Britain's concern at some elements in M. Giscard's draft report, Mr Straw rebuffed the growing demands for a referendum. Speaking in Brussels, he argued that Britain had held referendums on "whether to change, in a dramatic way, our constitutional arrangements" when the choices were clear, citing the 1975 vote on EEC membership, the plebiscite on the Scottish Parliament, and the pledge to hold a referendum on joining the euro.

Mr Straw said the EU constitution would "involve some significant reforms" but "any likely overall package will not remotely be on a par in terms of significance with whether we keep or share our currency.

"It is absurd to suggest ... that the Europe of 25 will be a tyranny when this wider Europe has been built on tyranny's defeat." But he refused to dismiss the Eurosceptics' criticism of the draft treaty as "baloney".

The Tory leader, Iain Duncan Smith, stepped up the pressure on Mr Blair to call a referendum on the constitutional treaty, saying: "Referenda have become the norm wherever changes have been proposed to the way people are represented and governed. But when it comes to the European constitution ­ a constitution that will decide how every person in this country is governed, regardless of where they live ­ the Government doesn't think the British people need a say.

"We believe that the people of Britain should have the opportunity to vote on any proposed European constitution."

Gordon Brown will stress his pro-European credentials tonight as he addresses the Confederation of British Industry's annual dinner in London. He will say that Britain can be a "leader in Europe" but he will also warn that the EU must reform to become a world leader. Mr Brown is expected to say: "I believe we can build a consensus in Britain about Britain's future in Europe as we build a consensus in Europe about how, together, we equip ourselves for globalisation."

Chris Powell, Labour's former advertising chief and the brother of Mr Blair's chief of staff, Jonathan, argues in a pamphlet published today that the Government can turn round public hostility to the euro. "Polls don't predict, they describe the status quo," he says.

Mr Brown and Mr Blair held separate meetings yesterday with four pro-euro cabinet ministers ­ Charles Clarke, Patricia Hewitt, John Reid and Ian McCartney ­ about the Treasury's 2,500-word assessment on membership. The full Cabinet is set to discuss the issue on Thursday.

Firm opposition to British membership of the euro has hit a new high, according to a fresh poll. The Guardian/ICM survey published today found 45 per cent of those polled would be "certain to vote not to join" in the event of a referendum. Another 9 per cent indicated that they believed Britain should join but might be persuaded to vote no.