Government will signal intention to join euro with referendum Bill

A bill allowing the Government to call a euro referendum will be published this autumn to send a positive signal of its intention to join.

The move was proposed by Tony Blair yesterday when the Cabinet discussed the announcement on the single currency to be made by Gordon Brown on Monday. The Chancellor did not oppose the idea.

The legislation will initially be published in draft form to allow a debate on how the referendum would be run. No decision has been taken on when it would be pushed through Parliament. The draft Bill will not commit the Government to a timescale for a referendum. But, if approved by Parliament, it would allow ministers to call a plebiscite if they decided the conditions for joining were right.

After meeting for almost three hours, the Cabinet endorsed Mr Brown's "not yet" verdict on his five economic tests. The draft "paving Bill" would keep alive Mr Blair's hopes of taking Britain into the single currency before the next election. But Mr Brown remains doubtful whether there will be enough convergence between the British and eurozone economies by then.

The legislation is also designed to "sugar the pill" for euro supporters who will be disappointed by Monday's judgement and to reassure Britain's EU partners that the Government is serious about joining. The Cabinet agreed that an important "change of gear" would follow Mr Brown's statement, under which the Government will take steps to meet the five tests and spell out the potential benefits of membership to the public.

The Chancellor will publish a new "national changeover plan" on Monday and a "forward agenda" including goals such as bringing Britain's housing market into line with the continent. Yesterday the Cabinet discussed the Treasury's 250-page assessment on its five tests, which was based on 18 studies on the impact of joining the currency.

It is believed that only one of the five tests, the impact on the City, has been passed. Two almost passed but two others were not met, including the most critical one of convergence with the eurozone.

Last night Mr Brown said: "We are all resolved that the decision on the euro must be taken in the national economic interest and it will be the national economic interest that will be the determining factor."