Brown aide: No euro vote this term

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Indy Politics

Gordon Brown's closest aide has given the strongest signal yet that the Government will not call a referendum on the single currency until after the next general election. Ed Balls, the Treasury's chief economic adviser, warned at a private seminar that an early referendum could split the Labour Party and risk Britain's economic stability. He said the Government should focus on public services in its second term.

His comments threaten to renew tensions over the Government's euro policy between Tony Blair and Mr Brown, who is more sceptical about early entry than the Prime Minister. Last week, Mr Blair told junior ministers there were two big challenges for his second term, public services and Europe.

Mr Blair has also reassured pro-euro businessmen that he has not closed the door to a referendum before the next election. But some businessmen have been so angered by Mr Blair sitting on the fence that they are threatening to withdraw their funding for the embryonic "yes" campaign, Britain In Europe.

The Independent has obtained a tape-recording of a speech by Mr Balls to a conference two weeks ago organised by Progress, a group which fosters debate between the Government and Labour's grass roots. An ally of Mr Brown, who was present, said: "It was the clearest possible statement that we won't hold a euro referendum in this Parliament."

Mr Balls said: "We have to be careful in the second term that we maintain our position as pro-European realists. We know there are big debates to be had on Europe, on taxation, on the euro, on economic reform, on political reform. The most important thing for us as a party is to keep focused on the need to stay united, stick to a long-term agenda and not to do anything in the short term which would divide us ... and which would put [at risk] our ability in 2005 to show we have delivered on stability, on full employment and on public services."

His speech reflected concern at the Treasury and Bank of England that the pound's strength against the euro is a huge barrier to early entry.Mr Balls said delaying a referendum would also keep the pressure on the Tories. "Our task is to keep the Conservative leadership as divided, out of touch and extreme in five years as they look today and for us to stay united and determined on delivery by a radical and credible approach to the economy and public services. If we can combine radicalism with unity I think we can win in 2005."

Mr Balls said Labour's "realist" position on the euro was in line with mainstream opinion among business and the trade unions. But Mr Blair was given a rough ride during private talks at Downing Street, before Mr Balls's speech, with businessmen including Niall Fitzgerald, the chairman of Unilever. Sources said strong words were exchanged as the businessmen urged Mr Blair to give a lead on the euro, with one questioning whether it was the Prime Minister or Mr Brown who was running the Government.

At the meeting, Mr Blair played down newspaper reports suggesting the Government had ruled out a referendum in this parliament.

A cabinet source said: "I think Tony wants to go for it but Gordon holds the whip hand because of the exchange rate problem.

"It seems Gordon wants to close it off for this parliament but it's not all over yet."