Brown predicts 'five tests' will secure euro referendum victory

Gordon Brown, the Chancellor, extended an olive branch to Downing Street over the euro yesterday by insisting that the Government could win a referendum "decisively" if his five economic tests were met.

Mr Brown's remarks to Labour MPs were echoed almost word for word by Ed Balls, his senior economic adviser, in a lengthy speech at Oxford University last night.

The carefully co-ordinated double move to reassure the pro-euro camp follows intense speculation that the Chancellor was cooling even further on Britain's chances of joining the single currency this Parliament.

Mr Brown spent much of his pre-Budget report contrasting the eurozone's poor economic performance and high deficits with that of the UK. But in what pro-euro campaigners described as a "peace offering" to Downing Street, Mr Brown told the weekly meeting of the Parliamentary Labour Party a referendum could indeed be won.

Mr Balls backed up the Chancellor's message last night whenhe said that Mr Brown saw "great potential benefits" from membership of the euro.

"The Chancellor has said that if we recommend that Britain should join the single currency on the basis of a comprehensive and rigorous assessment of the five tests, then we can win a referendum and win it decisively," he said in the annual Cairncross lecture.

But Mr Balls also used the speech to hammer home the primary importance of the five economic tests, which the Treasury has pledged to assess before June. In a detailed examination of previous disastrous attempts to fix the pound's exchange rate, Mr Balls said the decision to sign up must be based on "a proper assessment of the long-term economic case".

He said a key lesson from four attempts to fix the exchange rate last century ­ in 1925, 1946, 1964 and 1990 ­ was that politics must not be "the deciding factor on the timing and manner of the decision".

"We have reflected on these past historical events in order, this time, to get it right."

George Eustice, of the No Campaign, said: "If the Treasury genuinely bases its assessment on economics rather than politics then they will have no alternative but to conclude that now is not the time to join."

But Britain in Europe, the pro-euro lobbyists, said the Treasury was right to base the decision on a rigorous assessment. "To do anything else would be a compromise of our national economic interests and we are confident the Chancellor will make the right decision for Britain."