Blair hints at euro vote next year

Downing Street has given its clearest hint yet that the Prime Minister wants to hold a referendum on the euro in 2003, if he can win over his Chancellor.

Pro-euro business people have been given a nod and a wink that it is worth their while investing more than £1m to have a Millbank-style national campaign headquarters ready for a poll sometime in the next 12 months.

The pro-euro Britain in Europe campaign, which has close links with Peter Mandelson and other leading figures in New Labour, has taken a year's lease on a three-storey office block in Frampton Street, north London. It is big enough for 150 staff, and 360 telephone lines have been installed.

The group has hired Mark Lucas, who designed Labour's Millbank headquarters, to help convert the ground floor into a centre for a Millbank-style media operation.

The money has been supplied by the campaign's business backers. One insider said: "These people didn't get rich by splashing a million pounds left, right and centre without thinking about it."

Mr Blair has set a deadline of 7 June next year for the Treasury to complete its assessment of the five economic tests which Gordon Brown has said must be a pre-condition for joining.

Signals from the Treasury last week suggested that Mr Brown and his officials are a long way from being convinced of the case for joining the euro next year.

A Treasury paper published last week as part of Mr Brown's pre-Budget report warned that "if a country wants to establish a fixed exchange rate as part of a longer-term policy framework, the conditions which must be met to minimise the risk of destabilising shocks are specific and demanding: the economy must be very open, with a high share of trade with the country to which it is pegged, the economy and financial system must already extensively rely on its partner's currency, and the shocks it faces must be similar."

However, Britain in Europe's chief executive, Simon Buckby, has forecast in an internal memo to its board of directors that sterling will pass the five economic tests before June, and that the subsequent referendum will be won by the "yes" campaign despite polls showing public opinion is hostile to a single currency.