Cabinet faultlines are clear on this most divisive issue

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The Independent Online

They won't say it publicly yet but cabinet ministers believe Britain is heading inexorably towards membership of the single currency.

They won't say it publicly yet but cabinet ministers believe Britain is heading inexorably towards membership of the single currency.

The subject is of such acute political sensitivity that the Government has been forced to conduct any debate on the merits of the euro in heavily coded language.

Ministers insist that the assessment of whether Britain has met the Treasury's five economic tests will be searching and genuine, particularly the judgement over whether the UK's economy has sufficiently converged with the rest of the EU. But, during the past six months, the signs have been unmistakable that ministers are preparing the ground for a referendum on swapping the pound for the euro.

Tony Blair signalled his support for the currency in his New Year message when he said: "It is massively in our interests that the euro succeeds."

He has authorised Peter Hain, the minister for Europe, to argue the case for the single currency, a campaign he began last week with a call for shops to accept the new money from foreign visitors.

Jack Straw, the Foreign Secretary, who says he has undergone a personal "journey" towards support for Europe, has also predicted that the single currency launch would help win over the British public.

The five-point economic assessment does not have to be conducted until June 2003 but most MPs expect it to be carried out by this summer, with the referendum staged in autumn 2002 or spring 2003.

Cabinet ministers known for their enthusiasm for the euro include Robin Cook, the Leader of the Commons, Stephen Byers, the Transport Secretary, Charles Clarke, the Labour Party chairman, and Patricia Hewitt, the Trade and Industry Secretary.

David Blunkett, the Home Secretary, and Margaret Beckett, the Environment, Food and Rural Affairs Secretary, are among those with a more sceptical outlook. But the real government faultline on the issue is between Downing Street and the Foreign Office – on one side – and the Treasury on the other.

Gordon Brown, the Chancellor, and his team, suspicious that Number 10 is attempting to bounce Britain into membership, strike noticeably more cautious notes, both in private and in public.

Last summer, Ed Balls, Mr Brown's chief economic adviser, made plain his preference for delaying a referendum until after the next election, a stance hard to square with the recent warm words of Messrs Blair, Straw and Hain.

While the Government is struggling to accommodate the personal views of ministers and advisers within its wait-and-see policy, the Tory party has managed – for the moment – to shut down the issue that has bedevilled it for a decade.

Partly that is because the new opposition front bench under Iain Duncan Smith is overwhelmingly Eurosceptic. Those who disagree with their colleagues on the subject, such as Damian Green, Quentin Davies and Tim Yeo, all have portfolios well away from foreign or economic affairs.

Arguing the case for the euro from the Tory side has been left to former cabinet heavyweights such as Kenneth Clarke and Michael Heseltine and marginalised backbenchers including Ian Taylor and David Curry.

The new Conservative approach was reflected yesterday by Michael Howard, the shadow Chancellor, who denounced the Government for "tragically" squandering time and energy on single currency membership at the expense of hospitals and schools.

Almost all Liberal Democrats sing from the same songsheet, supporting membership of the currency, subject to resolving worries about the high value of the pound against the euro.