Currency blow for Major

Euro-sceptic denies manifesto plan as EMU debate intensifies

A hole was blown in John Major's policy of "wait and see" over the single European currency yesterday by the cross-party Commons select committee on the Treasury.

It is certain to intensify pressure on the Government from Tory Euro- sceptics for the next Tory election manifesto to rule out Britain's entry into a single currency within the lifetime of the next parliament.

The Tory Euro-sceptics believe Mr Major will be forced into a compromise, ruling out Britain's participation in the first wave of the European Monetary System, which the committee is convinced will begin on time.

The committee, chaired by senior Tory backbencher Sir Tom Arnold, reinforced warnings by Euro-sceptic David Heathcoat-Amory, who resigned as a Treasury minister to campaign against a single currency. This bears out Mr Heathcoat- Amory's view - shared by his senior former colleagues at the Treasury - that the timetable for the single currency cannot be ducked.

The committee said if it was the Government's intention to take part, "there could be costs from not doing so at the outset".

These would include losing the ability to shape interest-rate policy, arrangements for fiscal stability, and other institutional matters in the European Union.

The possibility of having to spend two years in the exchange-rate mechanism, one of the criteria for joining, could be a further difficulty.

While not expressing a view either way on whether or not Britain should join the EMU, the committee's report increases pressure on the Government to make clear its intentions on the subject.

The report will come as a blow to the Prime Minister's hopes of uniting the party behind the Government white paper and the promise of a referendum if the Cabinet proposes Britain's entry to the single currency.

The committee said that the timetable agreed by Mr Major in the Maastricht Treaty, for establishing Economic and Monetary Union by 1 January 1999, was confirmed at the Madrid summit last December.

5 The Prognosis for Stage Three of Economic and Monetary Union, Vols 1 and 2; (HMSO); pounds 26.70.