Brown urges caution on the single currency and warns of entry risk

Gordon Brown urged yet more caution on British membership of the euro yesterday as he signalled that the whole pro-European cause would be put at risk by a botched entry to the single currency.

The Chancellor also used his speech to the conference to assert his authority over plans for foundation hospitals, declaring that they would remain "fully within" the NHS, with borrowing circumscribed by the Treasury.

Hours after flying back from an International Monetary Fund meeting in Washington, Mr Brown made clear the Government would not breach its fiscal rules or abandon its public spending plans despite lower growth forecasts in the wake of the world economic downturn.

With UK growth forecasts estimated to fall from the 2.5 per cent projected in the Budget to a possible 1.7 per cent, his aides gave a clear hint that borrowing may have to rise to make up the shortfall. Independent analysts predicted that borrowing may have to rise by £4bn. Treasury sources stressed that Britain was still "on course to sustain our recovery" and there were "no public spending implications".

Mr Brown's caution on the euro was underlined when he dropped a key section of his speech earmarked for the benefits of membership of the single currency, such as lower transaction costs, lower interest rates and expanded trade.

Instead, the Chancellor appeared to add a further hurdle to British euro entry when he said he would not do anything that jeopardised the pro-European cause. He said if the five economic tests he set out several years ago were met, in principle the Government backed adoption of the euro.

But the tests were of "central importance" to the decision. "If the five tests are met, we will recommend joining the euro, and the final decision will be put to the British people in a referendum. And I give this commitment: nothing that is proposed will put our pro-European, pro-growth, pro-investment, pro-employment values at risk." Mr Brown said he wanted to match not just the achievements but also "the scale of the ambitions" of the 1945 Attlee Government.

He also unveiled plans for 2,000 "enterprise areas" where the Government would make it easier to create businesses and jobs by eliminating stamp duty and slashing the cost of investing and hiring staff.