Cabinet near accord on currency vote

The Cabinet is edging towards an agreement that any move towards a single currency or a more federal Europe after the 1996 inter-governmental conference would be first put to the British people in a referendum.

John Major has raised the prospect of a referendum in recent weeks, without making a commitment and without putting flesh on the bones. But a prime ministerial statement on the vexed issue is now expected early in the New Year.

The latest proposal circulating in Cabinet circles is that there should be a clear statement of the Government's negotiating position in the run-up to the 1996 summit - opposition to further material losses of sovereignty to Brussels - coupled with a promise that if that objective cannot be achieved the package would be put to the people. Mr Major is considering an advance commitment that the Government would not take Britain into a single European currency without a referendum.

According to one source close to the Cabinet, "this is a policy which all the Cabinet can agree on." As to the timing of a prime ministerial announcement, the source added: "This is not something that improves with keeping, like a Stilton and Port."

Proponents of the package argue that keeping referenda in reserve in the event of advancing further constitutional change would unite the Cabinet. Kenneth Clarke, the Chancellor, and Michael Heseltine, President of the Board of Trade, who have been strongly hostile to a referendum. The Chancellor does not view a single currency as a "constitutional"issue.

But there are signs of a growing momentum towards a common position, in which the key broker is Douglas Hurd, the Foreign Secretary, who has shifted away from his initial resistance. Malcolm Rifkind, Secretary of State for Defence, said in a BBC television interview yesterday that the arguments were moving in favour.

The compromise will not solve all the Government's problems. Cabinet right-wingers hope that it could pave the way for the nine "whipless" backbench rebels to be readmitted to the fold, restoring the Government's official majority to 13 and reinjecting outspoken Euro-scepticism into the party mainstream. But Nicholas Budgen, the MP for Wolverhampton South West, made clear yesterday that his price would be an outright pledge from Mr Major that he would not enter into a single currency during his premiership.

Tony Blair meanwhile contradicted reported differences among the Labour high command by declaring on BBC1's Breakfast with Frost: "If there is major constitutional change or for example you were to go towards a single currency, then there is a strong case for a referendum ... The important thing is to recognise that we've got to move, if we're moving towards further European integration, with popular consent."

Blair interview, page 2