Gordon Brown yesterday attempted to put the breaks on the growing momentum for Tony Blair to call an early referendum on the single currency.
Ed Balls, the Chancellor's chief economic adviser, warned that short-term political considerations must not be allowed to supersede the economic case for membership.
His comments – made hours after The Independent revealed plans for a referendum on 1 May 2003 were being drawn up in Whitehall by enthusiasts of the single currency – underlined the tug-of-war taking place within Government on the issue. He insisted the decision would be based on the Treasury's five economic tests, but also appeared to add another barrier to euro membership by saying the tests would have to be met in a "durable and settled way".
Mr Balls said: "Too often in our history, decisions have been made for political reasons which too often have been seen to override what's right from an economic point of view." The remarks, made at a high-profile conference on the currency, represented an attempt by the Treasury to seize control for the policy from Downing Street.
They will also be seen as a rebuke to the Foreign Secretary, Jack Straw, who said the decision would have a political element, and Peter Hain, the Europe Minister, who told a French newspaper a poll could be called as soon as this year.
Mr Balls said a decision to call a referendum would be based solely on whether the UK had met the economic tests. "We won't fudge [the tests] or short-cut them and we won't join at the wrong time or in the wrong way," he told a meeting at the Royal Institute of International Affairs.
"We won't take the decision on short-term political imperative and override the longer term economic imperative."
Mr Balls, who described himself as "a passionate pro-European", warned that political disasters were often linked to economic failure.
He said: "Most governments lose power because they fail on the economy. If you want to get your politics right you got to get the economics right. If you make a political decision when the economics is not right the economic and political consequences can be very damaging." Mr Balls said it would have to be "clear and unambiguous" that the five tests – on convergence, flexibility, investment, the City, and general growth and employment – had been met.
Michael Howard, the shadow Chancellor, said Mr Brown had "slapped down" the Foreign Office. "The Government are at sixes and sevens over the euro," he said. "If Labour think we should join the euro, they should say so and hold a referendum."
Charles Kennedy, the Liberal Democrat leader, yesterday called on the government to stop "dragging their feet" on the issue. He said there was "every reason" to believe the economic conditions for membership could be satisfied in time to stage a referendum in 2003.Reuse content