UK entry to EMU on hold till after election

Britain will put off entry into European monetary union until after the next general election, despite the Chancellor's known preference for taking part in the great euro experiment.

This is the line being discreetly put about at Westminster, despite predictions that the Government is keen to strike a more enthusiastic early posture on the issue.

Gordon Brown, the Chancellor, is "relaxed" about leaked reports from ministers that the Cabinet is moving towards a more conciliatory posture on European monetary union.

Treasury aides formally dismissed stories that unsettled the pound on Friday as "pure speculation", but privately expressed satisfaction that the idea of Britain moving more swiftly towards acceptance had proved so useful to the Government.

The speculation caused the pound to fall, but the stock market rose - a virtuous cycle of activity that neatly fell into line with government strategy. "A lower pound takes pressure off interest rates," said a senior source.

But reports of an impending announcement that could signal UK entry into a single European currency towards the year 2000 were strongly discounted. It now looks more likely that the Chancellor will issue a formal statement of intent this year, spelling out Britain's willingness in principle to take part in monetary union, but only when the terms and the timing are right. In practice, say sources, Labour's promise of a referendum on joining the euro is unlikely to be realised this side of an election - on the grounds that the Government will not risk losing office on a single political issue, however fundamental.

"It could be before or after the election, but not during," said a party insider. "You wouldn't do it during an election." At most, it looks probable that Mr Brown will publish a strategy paper outlining the alternatives, but coming down in favour of the principle of joining. This may not happen until early 1998, when Britain takes over the presidency of the European Union.

Labour calculates that the Tories could be wrong-footed on the euro, whenever the Government makes its move, short of putting abolition of the pound in a general election manifesto. "William Hague will have to do a U-turn, or he will be stuffed," said a Whitehall source.

Peter Lilley, the Shadow Chancellor, has laid down a remarkably flexible Opposition line. After rejecting EMU, he said: "Conservatives are pragmatists, and if the facts were to change, we would have to consider them very carefully."