Cabinet split over euro widens as Straw backs Brown

A split in the Cabinet over the single currency widened yesterday when Jack Straw lined up behind Gordon Brown, who is locked in a trial of strength with Tony Blair on the issue.

The Foreign Secretary dismayed pro-euro backers by dismissing claims by Blairite ministers that it was now an issue of "when, not whether" Britain signed up to the euro. Mr Straw said it was "first of all if, and then it may be when".

He praised the "huge care" Mr Brown was taking to ensure that Britain made the right decision and avoided the mistakes of previous governments, such as returning to the gold standard in 1925 and joining the European exchange-rate mechanism (ERM) in 1990.

"They were not accompanied by proper, detailed economic assessments and as a result of these, frankly, we got them wrong," said Mr Straw.

One pro-euro minister said Mr Straw was "a big part of our problem". But the Foreign Secretary's allies hit back. One said: "Some people are disappointed that he has not gone native like Robin Cook did when he moved to the Foreign Office."

Denis MacShane, the Minister for Europe, struck a different tone to his Foreign Office boss by branding opponents of euro entry as "fundamentalists". He said: "People have almost a fundamentalist faith in our currency, the pound, and a fundamentalist, almost religious, hostility to the euro."

Mr Blair believes he has a pro-euro majority of more than 2-1 in his Cabinet. Although he told MPs yesterday that there would be "the fullest possible discussion before the decision is announced", Mr Brown in effect enjoys a veto and is expected to deliver a "not yet" verdict in the next few weeks.

Although Whitehall insists that the gap between the Prime Minister and Chancellor has narrowed during several hours of talks, they are still at odds over what Mr Brown says about the Government's future intentions.

The Chancellor wants to rule out a referendum before the next general election but the Prime Minister is anxious to keep the option open and set out new hurdles, promising to call a referendum once they were cleared. The two most powerful men in the Government cannot even agree on the timing of the long-awaited announcement. Mr Brown said on Sunday that he would make his statement in June. Yesterday, Downing Street insisted that it could take place before then – possibly next week.

Mr Brown received a surprise boost last night when Mr Blair's favourite think-tank, the Institute for Public Policy Research (IPPR), backed his cautious approach. Its study concluded that while the exchange rate is now at about the right level, Britain should not join until the European Central Bank and the eurozone's stability and growth pact have been reformed – as Mr Brown is demanding.

The IPPR also urged the Government to publish "a clear road-map to membership", given the euro's likely benefits. But Richard Brooks, a research fellow at IPPR, said: "The European Central Bank, and especially the stability and growth pact, are real barriers to UK membership. The current UK monetary and fiscal policy framework is superior."

Writing in The Independent today, Lord Howe of Aberavon, a former chancellor, challenges Mr Straw's view by urging Mr Blair not to repeat the Thatcher government's five mistakes. He warns that no government can prosper in the face of "a serious and continuing clash" between the Prime Minister and Chancellor. Appealing to Mr Blair to "decide, prepare and persuade", Lord Howe says: "The time has come for him to fix a date for euro membership, to start now preparing for that conclusion and, above all, to start persuading the British people that he is right."

John Monks, the outgoing TUC general secretary, warned the Government that it would be "capitulating to the forces of Conservatism" if it failed to make a positive decision on the euro. He endorsed a "dossier" compiled by the Britain in Europe group of more than 60 investors reflecting concerns about staying outside the euro.

A survey by YouGov for Sky News found a 2-1 majority against euro membership but that more than half of people believe Britain will join within five years.

How the Cabinet lines up

In favour

Tony Blair

The Prime Minister knows delaying a referendum until after next general election would be huge personal defeat and is anxious to keep the door open.

John Prescott

The Deputy Prime Minister was seen as sceptical about early entry, but is now warming to the idea and will back Mr Blair.

Alan Milburn

An opponent of Mr Brown and his rival in future Labour leadership stakes, the Health Secretary is keen to push his pro-European credentials.

Charles Clarke

The pro-European Education Secretary is prepared to stand up to Mr Brown. He argues that the Government should "go for it", even if the Treasury assessment is "50-50".

Geoff Hoon

The Secretary of State for Defence, who is strongly pro-European and a former MEP, is keen to see early progress towards entry into the single currency.

Patricia Hewitt

The Trade and Industry Secretary has pro-euro credentials and fears that Britain will lose foreign investment if entry is delayed.

Tessa Jowell

The Blairite Culture Secretary is one of the ministers pushing for a full cabinet discussion on the euro before the crucial decision is taken.

Peter Hain

The Welsh Secretary and former minister for Europe represents the Government on the convention drawing up a new European Union blueprint and could play a vital role in a referendum.

Helen Liddell

The Scottish Secretary has called for "sixth test" in addition to the Treasury's five -- the cost of staying outside the eurozone.

John Reid

The Leader of the Commons has issued a challenge to the Chancellor's right to decide the issue, arguing that it is a matter of "not whether we will join the euro, but when".

Hilary Armstrong

As Chief Whip, she will report conflicting views among Labour MPs but will loyally back the Blair approach.

Margaret Beckett

The Environment and Rural Affairs Secretary, a former sceptic, has moved closer to the pro-euro camp and has had some involvement with the Britain in Europe campaign.

Paul Murphy

The Northern Ireland Secretary is pushing the case for a referendum before the next election.

Ian McCartney

He is close to Mr Prescott and his recent promotion to the Cabinet as Labour Party chairman was welcomed by Britain in Europe.

Lord Irvine of Lairg

The Lord Chancellor is said to be ready to "go for it" if Mr Blair decides that the time is right.

Baroness Amos

The Cabinet's newest member is thought to be keener on the euro than Clare Short, whom she succeeded this week as Secretary for International Development.

Lord Williams of Mostyn

The Leader of the Lords is not a member of either the pro or the anti camp. He is expected to side with Blair.

Cautious

Gordon Brown

The Chancellor wants to rule out a referendum until after the next election. He believes there has not yet been enough convergence between the UK and other EU economies.

Jack Straw

The Foreign Secretary has disappointed euro enthusiasts by maintaining his long-standing sceptical views and not arguing that Britain faces isolation in the EU if it stays out.

David Blunkett

The Home Secretary has never been a fan of the euro and is worried by possible loss of economic sovereignty, but might be won round by Blair.

Paul Boateng

As Mr Brown's number two, the Chief Treasury Secretary will support the Chancellor's cautious line.

Alistair Darling

The Transport Secretary, a close ally of Mr Brown, believes that there is no need to rush into entry before 2007 or 2008 and that time will be needed to win public support.

Andrew Smith

Another member of the Brown camp and former Treasury minister, the Work and Pensions Secretary is keen to ensure that the five tests are met clearly and unambiguously.