Britain set to pay dearly if 48-hour deal is struck

The Government will have to cede new powers to Europe, probably over immigration and frontier controls, if there is to be a deal on the 48- hour working week, British officials have admitted.

Sources believe they may win concessions on the working- hours rules in the present Maastricht reform talks but concede privately that this will only happen if the Prime Minister delivers some painful trade-offs. And these will probably be far more loathsome to Euro-sceptics than the 48-hour maximum working week.

Few issues of sovereignty are so jealously guarded by British Euro-sceptics as immigration, asylum and frontier controls. But France and Germany have made it clear that pooling more powers in this area will be one of their priorities in the Inter-Governmental Conference (IGC) on European reform.

France and Germany believe that curbing illegal immigration and countering international criminals necessitates far broader cross-border co-operation. More integration is almost certain to be the price they will demand for an opt-out or re-writing of the working-hours directive. If the Government will not join other member-states in consenting to this further tranche of integration, it will be told it must at least lift its veto, in order to allow others to go ahead without Britain.

As another price for concessions on working hours, Britain's partners are also signalling they may use their new lever, provided by the working- hours dispute, to increase pressure on Britain to allow a more "flexible" approach to integration. So far the Government is adamantly against its partners' terms for "flexibility", because it means a reduction of the British veto, and the relegation of Britain to a slow lane. Voices in John Major's government admit his tough stand on working hours has weakened Britain's negotiating position when it comes to final trade-offs in the IGC. This analysis supports the view that Mr Major's latest "battle" with Europe is simply political posturing in the run up to the election campaign. The IGC, launched to re-write the Maastricht Treaty, does not end until June.

Mr Major hopes his latest "battle" will help him win the election, which must take place by May. If the Conservatives lose, it will be Tony Blair who will sign the final IGC treaty, and he does not intend to contest the directive.

What has bemused Britain's partners in the wake of the European Court's decision upholding the 48-hour working week is Mr Major's assertion that his new fight with Europe is somehow "winnable". A Commission official said: "That is not how European negotiations work. There are no winners and losers; there is always a compromise."

A Whitehall source admitted: "At the end of the IGC there is bound to be a deal. There are always trade-offs. Given the Prime Minister's tough position on working hours, we will have to compromise on something else significant."

Many observers in Brussels believe it was counter-productive for Britain to fight so hard on the working-hours issue, as there is the evidence that the political climate in several member-states is shifting against further social regulation.

Even inside the European Commission, which has previously been keen to promote new social legislation, there are signs of a new mood of caution. "In many ways Britain has already won this argument. So why go on fighting and causing trouble in the IGC?" a Commission official said.